There appears to be a conflict between Virtuemart 2 with Fashionmart and the new USPS extension from virtuemart.net. Remove the Fashionmart theme and it works.

When a shipment module is selected and the Save button is clicked, it returns to Select a Shipping Method. A Loop.

Has anybody had a similar issue?

Never reported - but is the same thing apparent with the native VM shipping plug?
Just make a temp method with that and see if it is selectable..

Cheers