A normal Batwoman—or rather, the Batwoman from before—would definitely have rejected Joker's suggestion immediately. Though she wanted to instill fear in criminals by hurting them, skinning people was something Batwoman would never do.
Because skinning was basically repainting a collectible figure, and if you messed it up, you would ruin its aesthetic appeal.
But Zorn was a better Batwoman. When Joker said that, for one brief moment, he nearly laughed out loud in temptation.
Joker was an old friend, after all. Though Batwoman would never admit how special he was to her, thinking back carefully, Joker was always the one giving her things—bombs, laughing gas, interesting cases.
She seemed never to have given him anything in return. Fists did not count.
So giving him a suit of "leather" might actually be a good choice. Though Joker's favorite color was violet, while these Norse Warriors had pale sky-blue skin, making it somewhat unsuitable, it would not hurt to wear a different color once in a while.
Even Batwoman herself had several uniforms in different colors, such as light gray, pure black, gunmetal gray, glossy black, and so on.
But the thought of skinning someone alive only passed through his mind before being discarded, because Zorn knew perfectly well that this was still Joker testing him. After making the suggestion, the madman was staring wide-eyed at his face!
The moment Zorn displayed a personality different from Bruce's, Joker would likely turn on him immediately. Though there might have been some agreement between him and Deathstroke, Joker had never been one to follow rules.
He was willing to honor the agreement now only because he found it amusing.
"..."
So Zorn's response was simply to turn down the corners of his mouth, completely ignoring Joker's proposal.
That choice achieved its purpose as well.