Correct. One instance where an FP Settlement affords protection even if under Shadow control is for Shadow Event cards that have the prerequisite: Play if the Fellowship is not in a region containing a Free People's Settlement. [ref]
Axis & Allies Developer and Playtester; War of the Ring Editor and Playtester
When the rules or a card refer to a "Free Peoples Settlement", they mean a Settlement originally controlled by the Free Peoples (regardless of current control). When they refer to current control, they always say "a Settlement controlled by the Free Peoples" or "a Settlement under Free Peoples control". There are also references to a "Free Peoples Settlement under Free Peoples control" (also referred to as "an unconquered Free Peoples Settlement"). It's important to note these references to understand the application of the rule or card.
Of course, the same is also true for Shadow Settlements.