I think I was even more creative
Thanks for the reply. I got confirmation from PayPal regarding the non-zero item total as well. What I did was change my regular shipping to check for the coupon amount and make sure it's != 40. I then created two more shipping rules.
The first checks to see if the coupon amount == 40 and if the discounts <= 40. If so, we don't add any shipping charges.
The second checks to see if the coupon amount == 40 and if the discounts == 40. If it is then we add the 6.50 for shipping (though, now that I'm writing this out I may not need this second one).
My rule for the coupon is set to subtract the sub-total amount - 6.50 if the sub-total <= 40. All together I keep my regular shipping if this particular code value isn't present, and I keep my shipping charges when the code is present and the total discounts would bring the item total to $0. Shipping is also charged correctly when the code value is present but the item total is still > 0.
I suppose there's an easier way, but this is working for me now, and it was one of those "D'oh!" moments. Plus, the promotion just started this morning and the first customer, of course, ran into problems. Still, if you have an easier solution I'm all ears.