I similarly have an iPhone app I built and have been enjoyably using on my iPhone for years and slowly iterating on. I'd happy give it away for free and pay the associated increase in web service costs just so others can enjoy it. But the thought of paying $100/year (and having to deal with App Store review) is a bit much for a hobby app...
I'm surprised Apple put this barrier up since it certainly would have scared me away from iOS development as a poorer/newer developer. I guess Apple's happy with amateurs building but doesn't want to deal with their apps in the store. Maybe a compromise would be letting people self-distribute free apps without paying the $100?