Here's the facts, at least for authors. Baen is giving away the digital editions because, for now, it is driving print sales.
However, what Baen failed to realize is that ebook sales would actually surpass print. It has not yet, but it's headed that way VERY quickly, and they know it.
I believe the end of the Baen free library, as it is today, is looming in the not-too-distant future. If you have a prolific author they may allow one of their books to be used as a loss-leader. But with the competitive model that has formed up around pricing tiers, Baen simply cannot "gimmick" the system and convince authors that this is in their best long-term interest.
Not to mention not being in the best interest of Baen's bottom line.