If you are offering Free Shipping to select countries or Free Shipping Worldwide, you actually have to setup Shipping Profiles at $0.00 cost for those select countries or for all countries by selection "Anywhere in the world" from the "Ship to" drop-down menu. See example below.
For this statement to be true "Free Shipping to US and Canada", you have to create 2 Shipping Profiles at $0.00 - one for US and one for Canada.
Then you need to associate those Shipping Profiles with your products. Otherwise, system will use only those profiles that are currently assciated with your products.
To be sure your shipping is calculated properly, try placing an order yourself and then cancel it after you see how much shipping was charged.
Last Updated: Nov 11, 2013