After some experimenting I've found that there doesn't appear to be any way to sort by price or just show free books when searching the Kobo store directly from a Kobo device. However free books have a "Download" button next to them and non-free books have a "Buy" button, so you can quickly see which are free and which aren't.
Also, when you tap the "Buy" button it will ask for your credit card info if you haven't already entered these details, but there is a "Skip" button on this screen so you can skip entering your CC details and get to the page that shows you the price. Unfortunately you have to skip every time you tap the "Buy" button as it doesn't remember you want to skip!
Of course when using the Kobo website you can use the filter option to only show free books.
Search results on the Kobo website and on a Kobo device seem to be different. A search of "Treasure Island" on my Kobo Glo boughtt up 54 results, while the same search on the website bought up 126 results. Only two of the 54 on my Glo were free, but filtering the 126 to show free books bought up 50!
A search for "mystery" on my Glo bought up 200 results, and on the website 59437. I'm guessing the e-readers have a limit of 200 results.