If you book a flight requiring an overnight layover in a city (i.e. Zurich, Geneva), is it OK to leave the airport to stay in a hotel and then go back through security the next morning for your onward flight?

Yes.

Thank you, St. Cirq. You are the expert.

Yes. I do this all the time. Be sure you have luggage tagged correctly on the flight before the layover depending on whether you want to pick up your luggage or not. Personally, I never leave my luggage in the luggage handling area any more than necessary. All the break-in to my luggage occurred when the luggage had to stay in the luggage sorting area for a long time due to layovers.

When the layover city is interesting enough, I purposely schedule a long layover up to about 23hrs using the "schedule-priority" option when booking my flights if it does not add cost to my trip.

I've never used the schedule-priority option before. I'll have to give it a shot. Thanks.