The rules apply for all freesites. Domain root or subfolders. Also, I think you'd be better off using subfolders for your freesite and then list all those freesites together on your root so you create some sort of a hub. Now you can go do linktrades with other people's hubs. This way you're going to get one of those nifty PR things much faster.
Sites that only have links on the category pages of linklists stopped getting PR a few years ago. At least that's what my freesites did
