it makes plenty of sense to distribute itunes for free, as it generates money from the itunes store. didn't apple announce selling their 4 billionth song from itunes today? the number would not have been nearly that high if people were required to buy itunes software.
Sorry, I wasn't being clear. I can see it can make sense to distribute software for free, but the suggestion has been that Apple had no choice about making software for the touch available for free.
When the SDK comes, I expect some will develop free software and others will develop commercial software. Will it then be OK for Apple to provide software free if they choose to do so?