What is the basis of a "free market" when copies are free?

A basic and fundamental economic note about my "free everything" idea:

I believe in a free market for creative works, but one that works differently from traditional free markets. A normal free market balances supply and demand of "units", where producers make one unit for every unit used by consumers. But in the world I want to see, this concept of supply is irrelevant. There is no reason to limit supply when the incremental cost of additional units is virtually zero, as is the case on the internet. Supply in the traditional sense, therefore, should be virtually infinite; as a result, this free market I envision is better served by a different notion of supply, which is, approximately, the supply of distinct works (unique works, not copies). The balance in the intellectual free market should be between the supply of distinct works and the demand for distinct works.

Today, of course, the market is based on balancing supply and demand of copies only, which in my view is just plain wrong. If copies were free, it would utterly change the face of both content industries and technologies. The changes to technology have already begun in a limited fashion (e.g. the 60 GB IPod), but it remains to be seen whether the content industries will be willing to allow this new world, or whether they will enact ever-stronger laws to ensure we will be stuck in the 20th century forever.