you are correct nmg, it is saved and easier to refer to because of its ID in the db. I'm sure you can change all references of it to ensure it's a free form text field but you would run into issues with wrong spelling and what not later down the line.
if you are looking to edit county though, all that can be done through the admin. at least for version 2.x you can navigate to Admin > Configuration > Countries
- Go to United Kingdom towards the bottom
- Click on Edit
- Go to tab for State/Province
- Add County
http://i48.tinypic.com/1t10dy.png