I've offered my first ebook free on Smashwords and Feedbooks. I can't give you any data on how this has affected sales of other ebooks, because I don't have any others out yet. I've had a number of 'I'd read more from this author' and 'I'd pay for future ebooks' comments, but whether they translate into actual sales remains to be seen.
Here's something I found interesting... my ebook's received a lot of attention on the B&N website because I spruiked it to a forum of nook-owners just after the nook was released (sheer lucky timing, and plumboz's tip-off). Once it hit a certain number of downloads, the type of attention (positive or negative) didn't seem to matter - it was on the front page of the free ebooks section, people downloaded it regardless. Possibly without reading any reviews
There are a couple of points here - a) a free ebook can help get your work in front of a lot of readers if it's placed correctly and b) free ebook 'sales' won't necessarily be crippled by the dreaded negative review.
As far as 'building readership' with a free ebook - it works on me. Well, it will work once I have an ebook reader. Atm, reading from an LCD screen is hard work :-/ But if I read a free ebook and like it, I do file the author's name away in my mental 'writers whose books I'll buy' list
