Free Isn't Always Better
I guess I just don't get all the "MobileMe should be free" comments. Don't get me wrong - I'd like to pay less and get more. But free comes at a price, either in functionality, support, or something else. Apple is a for profit company. If they don't earn a profit they can't develop future services and products. All of the infrastructure needed for these type of services is expensive. As opposed to Google's offerings, when I have had an issue in the past Apple provided support (I might add great support). That's worth something.
I think the question is more about pricing of the service. Perhaps the cost is to high for the services provided and a lower price would be better received. And yes, it could be bundled as a "premium" benefit of Apple device ownership. But that would probably be a "1st year free" type of deal, not forever.
Personally, I'd love to see a combination. Free for basic service and lower storage limits; Paid subscription for more storage, premium features, and continued support.