I've heard nothing about it being free, but I hope it doesn't become free. Have you tried playing online on the PC or PS3? It's full of annoying little kids who think it's more fun to ruin your game than actually play the game.
At least having to pay for the service means you can exclude some of these little oiks as they don't have a credit card, plus Microsoft are much more up on removing cheaters and dealing with inappropriate content.
i agree with cakeboy - we have a PS3 and a 360 and i would much rather play online on the 360. when you think about �40 maximum spread out over 12 months it only works out to �3.33 per month, which is nothing really.
The LIVE service is not going to be free, the monthly sub is �4.99 or you can get a 12 month sub for a max of �40 or a min of �28, but when you sign up to xbox LIVE you do get 1 free month of LIVE gold. If it were free then we wouldn't have the good service we have now, there are times the service its not perfect but most of the time its pretty good,