I think "free" is the most accurate succinct terminology to be used here, when used with it's most common definition. An ad-supported site/service can still cost money to use (e.g. Hulu Plus), so just referring to a site as ad-supported to distinguish the business model is no clearer than calling it free. The way to resolve this is to be more explicit, such as saying it's "monetarily free".

But we all knew what was meant, so why bother?

Yeah; Google seems to make quite a bit of coin off their "free" search engine and with their "free" maps website.

As for why bother discussing this: I don't think I'm alone in believing in a better B2C business model for the internet than "we'll get lots of users to spend lots of time with our thing, then make them look at ads". It's been said many times here before, but I'll repeat that it seems like a waste to have so many smart and talented people spending so much time on making people look at ads.

Ads seem to be paid attention to enough for webmasters to bother using them. Vendors blocking them by default could be problematic