Hi Theo. I have just installed version 3.5c ( the d version dated 6 Dec is boogered up...the files install as hidden and mess up the admin panel, not to mention it didn't work. :)
So first upgrade to 3.5c that alone may solve your problems
That number is set in the admin screen in modules, shipping. You set the threshold and you set a max weight that you are willing to ship free.
That is not happening to me with 3.5c. I also use UPSXML , In fact it was a plesant surprise for me because ,on occasion, I get a large order that needs to be overnighted. I hope I helped a bit.