Well, there have to be limits with what free ad-supported hosts will do. Also, I believe that in life you can't let money drive what you do. Look at people that work in a job they hate just to make money. Are they really happy?
I'm not saying that all ad-supported hosts are bad. In fact, ads can help grow a free host. I have observed, however, some shady practices by free web hosts that serve ads. The best example of this is CJB. They are a VERY popular free web host but it clearly puts money above their users. They attempt to install adware onto users' PCs without consent by attempting to trick their users. When it gets to the point when you forget about the user and put money above all else that's when things go bad.
Other free hosts that display ads may also be unknowingly contributing to the decaying state of the internet. Some of the ads on Google Adwords are downright dangerous from a security perspective, linking to adware and spyware sites. While the hosting company may not be aware of this, they are, along with Google, contributing to someone's profiting on an uninformed user who is tricked or bated into downloading adware.
Also, to this statement:
A correctly run free host will give a profit, not a loss.
There doesn't always have to be a profit or a loss, sometimes it can just be a kind jesture. You can run a free host with excess space. If you own a server with X GB free and have more bandwidth than you will ever use, and you are using it for something else already, than why not give away the extra free space? You don't have to gain or lose money. It's like someone who owns 4 cars. You can only drive one car at a time, so why not put the others to good use. As long as you paid for the gas, and you know you won't use it all before it all dries up (hosting fees) why not let someone else use your car? It doesn't hurt you.
BMR777