Looked at various forums and couldn't get an answer I could understand.

If I have Shrine to Nurgle in play and I assign 2 damage to a unit with 3 HP and a toughness of 2...I understand the damage counters won't stay on the card...but does that still count as damage, thus becoming corrupted or does the damage never apply and thus no corruption??

Damage cancellation happens right before applying damage. A unit is considered to have been dealt damage if at least one damage is applied to it. In this case, all the damage was canceled, so the unit wasn't dealt damage and you can't use Shrine to Nurgle's effect.