After talking more to people on Kindleboard, I find that the "non-compete" clause may not apply to free books that are not in the 70 percent option. (or at least is not being enforced.)
I've been wanting to put my short story collection at free for some time, considering it works as a sample of my published short mystery fiction. I guess it's okay, then, so I just now put it at free on Smashwords. Let's see how that goes....