Mike,
I did try the same shipping settings on another server running the newest version, and it worked! So it obviously seems as if the older version I originally tried it on carries a bug or two concerning the shipping settings.
My question to you is, upgrading the current platform from 1.4.7.3 to the newest version would probably render many "customizations" we did to the 1.4.7.3 worthless. Could I upgrade just the shipping part and if yes, how do I do it and do you think it will work?