Ok so I answered some of my own questions. I had Show Domain Options (product details tab) unchecked. Once I checked that I got the window where it asks you to input your subdomain. It now fills in some of the empty boxes so that answers those questsions.
@dansgalaxy Thanks for the suggestions, I tried setting things your way and I still run into my final problem, and that is that the account creation fails with the free subdomain. All other accounts work fine. I tried the wrong password just to check and I do get an error that indicates login failed.
Now that I'm thinking about this, aren't subdomains created from the control panel? In my case I want the subdomains created on a different domain name then my server (ex: in whmcs server is myservername.mydomain.net but I'm creating subdomains on freedomains.com). Should I create a new "server" (even though this server is really just a domain on the real server) and make that the default for subdomain accounts?
Well I tried creating a fake "server" pointing to the domain name and using both the cpanel username/password and the whm U/P. When I use the cpanel account login fails when I use the whm just get the plain account creation failed.