the ups shipping rate is two parts, the UPS rate lookup server behavior, and the USPS shipping charge in the eCart object.
The UPS shipping charge in the eCart object only applies the rate that is returned from UPS. Disabling the charge does not disable the server behavior. the server behavior will still try to get the rate lookup.
If you don't want to remove the server behavior completely, just set the failure URL to be blank. rate lookup will still fail, but you wont be redirected.
The flat rate is not working because of the Quantity of item 0 >0 trigger.
this ios looking for an item in your cart with the ID of 0 If an item with the ID of 0 is not in the cart, the rule will not trigger.
also, the calculation Item 0's FlatRateShipping plus 0 is retuning the FlatRateShipping for the item with the ID of 0.