I think this is a great idea and I'm sure you'll find many bloggers who would be happy to submit individual blog posts. If a blogger keeps submitting posts, they get multiple links to the same blog.
Setting the bar at 100 words would probably weed out most of the bs content. But this is a tough issue - how to determine quality-control standards for blogs. With galleries and free sites, the rules are very objective and quantitative: # links, # pics, etc. With blogs, you have to judge the quality of the writing, which will always be a subjective judgement to an extent.
As for free hosts, I use a free hosted blogging service so of course I think you should allow them. I figure that a good blog is a good blog, regardless of where it is hosted. But I don't run a big linklist or directory so I don't run into any problems that you guys have with submitters.
Those are my thoughts, hope it helps.
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