I agree with DD, but I also think that's more relevant to sites which are larger than a standard 4/5 page free site & although the principles remain the same there are a few things to think about
:
1/. The amount of 'content' on a free site index page is normally a lot less than a 'domain index' or a ll index page, therefore - if you use text links for your recips (and/or alt tags on your recip banner images) & you have 8-10 recips per index - you will be changing the content of your index page substantially...
2/. When you mirror pages & copy in recip tables you also have the opportunity to alter your entry page content (& metas) slightly - therefore increasing the potential keyword coverage for your site.
It's a little extra work for a whole extra set of possible number 1 listings...
3/. What Matt said: These recips are traded for traffic which is what you wanted in the first place & is always more immediate than se traffic & good volume... I wouldn't build a 'standard free site' simply for se traffic & although I could get a LOT of traffic from one set of recip's if I used the 'big lists' there are a lot of longer term / good quality traffic to be gained from smaller ll's.
4/. There are also many niche specific ll's, they can really help with se rankings (excellent link relevance) - unless you only build for one niche, or use a different set of recips for every free site or left out one of the 'bigger' recips each time - you would miss those.
I also agree that - for Doc - the 1st option is better - & your folder names could also be the 'changed' keywords you targetted when you altered that entry page (I'm not sure it helps overmuch but I think it will add a little relevance to the incoming links).
For ll's that insist all pages be within one folder you just have to decide whether they're worthy of being on your 'original index' - or forget 'em.
...sorry about the monster post
