I know I'm in a minority of users, but I still think the free is useful.
Having initially spent many months using my iPhone and not paying for any apps at all (only downloading free apps), I took my first step into paid apps with a cheap $0.99 app, and realized that for the small price, it made my app (and phone) experience a whole lot better. After that, I was always willing to spend money on apps (even if it was just for experimentation) and Instapaper became one of the first apps I bought.
I don't know if this is an unusual thing, but I've noticed a lot of my friends act in a similar manner. After paying for that first app, they are very willing to pay for more. And you'd be losing some very good customers if you removed the free app.
I suppose I understand Marco's decision even after all this, I'm still unhappy that we might see it go.