Making Avalon free play isn't going to lower the game and player quality...it's already there. If anything, it opens it up to changes, and more interesting RP. How tiring is it to see the exact same handfull of people on all the time, with everyone just sitting aroud town squares, doing nothing really, besides a few people like Tukar who is always running around, Elmak, etc? Avalon is small, and it gets old fast. Paying for something that isn't worth it doesn't make sense. It's like paying almost $2 for a bottle of water in a store, when you can just walk over to the fountain and get a drink. Of course, some people don't mind doing that, others do.
Easy way to make up the differance of money by going free play? It's easy, put in a credit system. People can by credits via donation to the game, or can buy them for gold IG. Credits can be converted to lessons, or saved to purchase special, unique items, ships, pets, custome mounts, etc. There's plenty of people that just have to have the unique stuff, and are willing to throw money away on it.