Free shipping doesn't appeal to me anymore than a lower price with a shipping fee added on. When I see free shipping I automatically assume it's been built into the price. Like someone else said, there's no such thing as 'free' shipping!
What really bothers me, and this really should be a whole new thread in itself, is when sellers offer free shipping on an item that's already priced too low. I see card sellers do this all the time. How can they make any profit on a $2.00 item with free shipping when it probably costs at least $1.00 to ship, along with Paypal and Etsy fees? Drives me nuts. :/
One thing I want to mention about jacking up the price to include shipping. When I search for items, I often search by price range, taking into account that shipping will be added on to those prices. If you raise your price to include shipping, you may bump yourself out of my price range and not be included in my search. You're also going to pay higher Etsy fees when the item sells. Etsy doesn't charge a fee on shipping. Just something to think about. (if all this has already been mentioned, I apologize. I didn't read through the whole thread)