i'm now experiencing this issue (along with a permalinks/checkout issue AND a paypal gateway issue. >.< )
i've gone in to Settings > Store > General Settings > Target Markets and verified USA, USA+minor and Canada are set properly. (I even selected all/save the selected none/save in hopes to clear up any cruft..) still getting this error.
i'm getting it on pretty much every product i try.
i have tried to Disregard Shipping for this Product and also still get the error:
Some of your cart items are targeted specifically to certain markets. As a result, you can only select those countries as your shipping destination.
i'm up to date on WP, WPEC and all plugins and themes. the only thing in installed recently was Visser's Store Toolkit (to try to solve the permalinks issue!)
what's interesting is i can complete a 'pay by check' order even with these errors. (not sure about paypal since i'm not sure it's working at the moment.