Yeah, the wording is confusing. A long time ago, there was no paid software, there was only software where you got the source code and other software where e.g. it was pre-installed on some hardware and the manufacturer didn’t want to give the source code.
In that time, a whole movement started fighting for software freedom, so they called their software “free”.
Those Spectacle changes look good. The old UI made some amount of sense, if the primary use-case was taking complete screenshots, but even for that, there’s probably a single shortcut to do that directly.
And I do find, I generally want a smaller cutout these days, because you can just fit more stuff onto modern displays, some of which is going to irrelevant.