Guys over MacRumors have found some error messages in the newly released iOS 4.2.1 GM claiming to options for a free MobileMe service. As you can notice in the screenshot below, the code mentions free MobileMe accounts for all iOS devices. The code also points to that MobileMe mail will not be available in the free MobileMe package.
Anyway, we'll keep you informed in case Apple will release a free version of MobileMe for iOS devices, stay tuned.