This is a great/fun question.
Like many of you, I've been writing for a while (10 yrs.) and it's how I make my living. I think that writing for free is a personal choice and will not replace paid content in the long run.
I can't think of any instances where there isn't value in writing for free. (Unless it is for a greedy client.) But when I write for free it is in exchange for free advertising (byline or blurb), to gain name recognition in a new field, to help people, support a cause I feel strongly about, or to get feedback in a genre that's new to me. I strongly urge young writers NOT to write for free just to get clips. If they want it, trust me, they'll pay for it.
I just don't know how people can ONLY write for free. If you have a day job that pays the bills, then I can understand, but if you're a professional FT freelancer, you simply can't do that. So you have to find that balance between free and for a fee. One of the things journalism majors learn is to specialize--develop a niche. So, you do that, and become a member of the community you write about (finance, music, entertainment, politics) and get to know contacts and resources. You develop your craft and that makes your skills valuable. So, I don't think that free content or the person who only writers for free will ever replace paid content. It's like with any other profession...maybe I know something about computers, and I can fix minor problems for free, but if I did it full-time I'd have to start charging people because I have bills to pay.
Likewise, companies and websites can't survive on free content alone for many reasons that I won't ramble on about.
So, I think writing for free is a personal choice that depends on your goals and circumstances. But like with anything else in life, you gotta give a little bit. <img src="/images/graemlins/smile.gif" alt="" />