Dilute real vs new players
Ken,
I agree with your general premise that it might initially cut into people playing for real dollars, but I think most people are hesitant to put money on the line at something they have no experience at. If you allow them the opportunity to try it for free, they probably would become hooked and move over to real money to put their newly acquired skills to the test.
I know that is true with me and learning to play poker. I have never played the game until about a month ago when I took up learning by reading and finding a poker site where I could play for free. After I got comfortable with the structure and how to do the mechanics, I was willing to move to real money. After just a couple of tries I won my first S&G single table event. If I had not had the opportunity to learn without putting money on the line, I am not sure I would have been as interested in playing. (That is not totally true, I would probably have given it a shot, just been a lot poorer from the learning curve.)
Now I find myself more interested at higher limit tables because I know the games will be tighter and more "rational". I don't find myself getting beat by some guy going to the river and drawing a straight with two low unconnected unsuited cards when I hold three kings.
I think the same would be true for tournament blackjack.
Just my two cents.
Pat