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Lots of registrars are giving away free .info domains, limit of 25 per account per registrar (Affilias doesn't charge the registrars for them), and renewals after the first year are I think in the $4+/year range. My reading of the situation: .info is doing a *lot* worse than projected, and they're trying to increase exposure and hook some longer term users with the free samples...it's not like there was much demand anyway, so they're not giving away many domains that people otherwise would have paid for. I have seen .infos in google, don't know if there's any special treatment but it does show that they're certainly not banned outright.
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