I tried to register a "free" account, but I could not find any way to avoid paying $9.95 to have a domain hosted. I don't really need this feature; a third-level domain (meaning a subdomain of whatever your "home" domain is - something like mydomain.freehostia.com) would be more than acceptable. Most other free hosting services offer this, and I was surprised that I could not detect any way to do this on your system, so I aborted the attempt.

Is this capability there somewhere, and I just missed it? Or do you not offer it at all?

I am afraid that this would not be possible. In the begging of September, 2010, was implemented new Management decision to discontinue the creation of new ".freehostia.com" subdomain names. Present existing subdomain names remain operational, but our customers are not be able to create any new ones since then.

We are forced to take such a drastic measure due to the fact that ".freehostia.com" subdomain names was lately used mainly for abusive activities, which we could not afford.
Additionally to the above mentioned limitation, in the middle of November, the hosting of new domain names with TLDs: ".co.cc", ".vv.cc" or ".tk" was discontinued as well, due to the same reason.

The free hosting plan remains available with the Chocolate hosting plan, although our customers will need their own domain name hosted with the account.
In case you do not have such one you will be able to register a new one via the Register/Transfer section of your account control panel with us. Here it is a list of the supported TLDs for registration and their prices:

http://freehostia.com/domains.html

If in the future you have any other questions, do not hesitate to contact us again.

_________________
Best Regards,
Miles
ModeratorsTeam
Freehostia.com