It seems like a silly disincentivization to charge people $100/year to make their software available for free. It will also encourage AdWare. I hope they change this. Thoughts?
I doubt that they will. I can understand $99 can seem like a lot to a student or a hobbiest - some iPhone developers are teenagers so that's a big ask. But for most serious developers it's pocket change, and since Apple makes a net loss from free apps, and there don't seem to be any shortage of them, I doubt that they're especially bothered if they miss out on a handful of indie apps because of the developer fee.
Anyway, there's nothing to stop you learning the SDK and fully developing an app on the simulator. Once you've built your world-changing new killer app you'll probably not let $99 stop you from releasing it. It's not like they're charging you just to try out the SDK or see if iPhone development is for you.
I'll tell you what - if you develop a free app that you reckon is worth releasing but you still can't or aren't willing to pay the $99, PM me and I'll be happy to publish it for you (if it's any good) :0)