modify template form fields

Yes you can. When you select the field you want to modify within the form editor, the field specific options will appear. Within those options, you will see "Input Type." Double click there and select which type you would like, which in your case will be "select". The screen will refresh, then you will need to place your options for the dropdown separated by a comma, no space. 

Another issue you will need to consider is if your first value will be the default, or if you want to use "Please select one" as the first value. If you want Please select one, then use this as the inline value: \,\::\Please Select One...::, This way the text will show, but they will not be able to select it.

And switching the types does not mess with reporting. You can have country as a select in one form, a hidden field in another, and a textarea in another. It just modifies the way the value placed into that field. That being said, I would highly recommend using a select function in all of your forms. You can then utilize dynamic states then as well and it keeps things neat.

Following page may be of interest if you want countries in drop down.

test.hollebone.ca/marketo-form-geoip-lookup/