I think you are underestimating the psychology of "Pay" vs. "Free". Even at just a few bucks, a for pay app will get a fraction of the users the same app would get if it were offered for free. A lot of small time developers even feel that they are contributing to the community by creating free apps. Unless Apple creates an artificial bottleneck for the free apps, there will likely be no problem finding free versions of any app you are looking for.
No no no! You're forgetting the way the iTunes store works! You're always logged in...it's easy to just buy a song on a whim.
Software will be the same.
I would NEVER put my credit card in some small website to buy an app for $1.99. It just wouldn't happen. I WOULD very easily click on a $1.99 item in the iTunes store without much thought. No question.
So there are a LOT of free apps out online that are really worth $2, but the developers can't charge that normally online. So they make it free and just forget about it. With the iTunes store they CAN charge $2 and still sell a lot of them. I know I'm not alone in my "I buy impulse purchases on iTunes but not the web" lifestyle.
And that's a GOOD thing! Lots of free apps don't get many updates (if at all). If they're bringing in money from it you'd better believe they'll keep updating to stay ahead of the competition!
I think we'll see a lot more $1 and $2 apps than free ones. And not because of Apple...it will just work out that way for the reasons I listed.
And that's great news! It's not much money but it will result in FAR superior apps!
EDIT: Similar point here:
http://mooseyard.com/Jens/2008/03/the-beauty-of-99¢-iphone-apps/
Basically, the web was SUPPOSED to work on micro-payments, but no-one could make it work. On iTunes, it's possible. iTunes can be what the web wanted to be, but never worked out.