Custom Field as Custom Taxonomy?

Without knowing exactly how your input form looks, I can only give you the following as a suggestion. Basically you verify that you want/have permission to save the data and then take the meta’s input and set it as a term in your taxonomy via wp_set_object_terms(). You’ll want to fire this every time a post is saved… ie on the save_post hook.

function save_taxonomy_data($post_id) {

    // verify this came from our screen and with proper authorization.
    // your form should have a nonce <?php wp_nonce_field('taxonomy_country','taxonomy_noncename'); ?>
    if ( !wp_verify_nonce( $_POST['taxonomy_noncename'], 'taxonomy_country' )) {
        return $post_id;
    }

    // verify if this is an auto save routine. If it is our form has not been submitted, so we dont want to do anything
    if ( defined('DOING_AUTOSAVE') && DOING_AUTOSAVE ) 
        return $post_id;


    // Check permissions
    if ( 'page' == $_POST['post_type'] ) {
        if ( !current_user_can( 'edit_page', $post_id ) )
            return $post_id;
    } else {
        if ( !current_user_can( 'edit_post', $post_id ) )
        return $post_id;
    }

    // OK, we're authenticated: we need to find and save the data
    // right now it is only working on posts and pages, need to adapt to other types here
    $post = get_post($post_id);
    if ( ($post->post_type == 'post') || ($post->post_type == 'page') ) { 

        isset( $_POST['post_country'] )
            wp_set_object_terms( $post_id, $_POST['post_country'], 'country' );

    }

}
add_action('save_post', 'save_taxonomy_data');

Adapted from Custom Taxonomy Panels and also similar to Unable to save custom taxonomy terms in a custom-built metabox.

Second Attempt

The first attempt is pretty much how to save taxonomy data from a metabox. I took a glance at the WP User Frontend code and made a few adjustments. This is intended to replace what was above, and assumes that cf_country is the name element of the input.

function save_taxonomy_data( $post_id ) {

    // verify this came from our screen and with proper authorization.
    if ( ! wp_verify_nonce( $_POST['_wpnonce'], 'wpuf-add-post' ) ) 
        return;

    // OK, we're authenticated: we need to find and save the data
    if ( isset( $_POST['cf_country'] ) ) { 
        wp_set_object_terms( $post_id, $_POST['cf_country'], 'country' );
    }

}
add_action('wpuf_add_post_after_insert', 'save_taxonomy_data');

Third Attempt:

function save_taxonomy_data($post_id) {

    /* 
     * verify this came from our screen and with proper authorization.
    * your form should have a nonce <?php wp_nonce_field('wpuf-add-post','_wpnonce'); ?>
    */
    if ( !wp_verify_nonce( $_POST['_wpnonce'], 'wpuf-add-post' )) {
        return $post_id;
    }

    // verify if this is an auto save routine. If it is our form has not been submitted, so we dont want to do anything
    if ( defined('DOING_AUTOSAVE') && DOING_AUTOSAVE ) 
        return $post_id;


    // Check permissions
    if ( 'page' == $_POST['wpuf_post_type'] ) { // post type is a hidden field in wpuf_
        if ( !current_user_can( 'edit_page', $post_id ) )
            return $post_id;
    } else {
        if ( !current_user_can( 'edit_post', $post_id ) )
        return $post_id;
    }

    // Work on all post types
    if ( isset( $_POST['post_country'] ) ) 
        wp_set_object_terms( $post_id, $_POST['post_country'], 'country' );


}
add_action('save_post', 'save_taxonomy_data');