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I don't think it's as simple as that. Very often even small games from indie creators have price tags on them - at least, that is the trend that I'm seeing. I think choosing only free or PWYW games would eliminate a large number of excellent games and excellent creators. That said, I aree with all your points. So I think free, PWYW and playtest kits should not be ruled out. But at the same time, I think designers could submit free copies of their games to the book club for distribution to participants.

But this does open up the question of how we'll choose which game to read. I see two options:

1. Voting. 

Pros: Democratic. People are also more likely to participate if they can choose the game.
Cons: Popular games will be chosen. Games from less popular creators will always lose.

2. Lottery (suggestions are solicited and then you roll dice to see which one is read this week, same suggestions are rolled on next week)

Pros: Gives every game an equal chance of being chosen.
Cons: The counterpoint to choosing a small game is that the number of people who might participate is low.

So I'm not sure how to decide between these options. I think that Lottery is more fair but Voting is better if we want more people to participate.