Couple of minor points:
1) For your webmaster, an RSS feed for "News and New Releases" is always nice and allows you to stay in front of your readers without them having to visit the site on a daily basis.
2) Another example to look at is Baen's
Webscription site: similar concept, books (both pay and free) only available after a free registration. Large library of both free and pay books, no DRM, multiple formats, and (at least from the sounds of things) pretty much mandatory author input.
3) Second the idea of having a talk with Hadrien of feedbooks.com - he uses a single internal format that allows him to automate the process of creating user formats on demand without dealing with the associated storage problems of a gazillion formats.
4) There's no need to make every (or even most) books available for free (as much as we would love that) - When Tor did their promotion with free ebooks, they only released the first volume of a series or a long out-of-print book. Several of the authors found that even with that limited visibility, sales of their other books (even paper books) significantly increased.
And WOW, been ages since I've read anything by Vonda McIntyre, thank you for reminding me!