We have recently launched a completely free Moodle hosting option.
You can visit http://www.freemoodle.org and have a look around the documentation, read about why this has been created, its aims, and then join the community area.
One of the few conditions is that your course should be open for others, and you can't charge for the course. So it's free Moodle hosting, for courses that are free for others. You can however separate your own students from the public by using Groups and Groupings (an example might be for using Assignments).
This service does have some (understandable) conditions, but does come with the full backing of a Moode Partner (so it's not going to disappear overnight!), and no catches. We think this is a really important development, and are looking for people who want to help too
Check it out ! (and maybe get involved?)