On USPS use Zencart for the password ... it will work fine ...

You need to make a new shipping module from flat.php and clone it to something like:
/includes/modules/shipping/flat.php to usfreeship.php
/includes/languages/english/modules/shipping/flat.php to usfreeship.php

Replace all flat with usfreeship and all FLAT with USFREESHIP they are case sensative ...

Now set your US shipping zone on this shipping module ...

Set the amount to charge to 0.00 and handling to 0.00 ...

This will now show for the 48 states you have setup ...

NOTE: upgrading is always recommended ... at least to v1.2.7 until you can get to v1.3.5 ...