I thought I'd chime in on this, since I just spent about an hour figuring out what the problem was.

I installed v1.3.6, which worked perfectly. Then I proceeded to create my template, tested it, and it worked perfectly.

Finally, I installed a 'newsletter subscribe' contribution. This has broken the create account process, and I receive the 'must select a country error'. If I switch to classic template, it still works perfectly. The only real difference is the newsletter subscribe contribution.

So, at least in my case, the issue is with that contribution. It doesn't seem to have the updated code in the files it alters for the account creation process.