After doing a little work, you can now have free domain hosting from Muttle.com.
- 50 MB of Space.
- Browser Upload
- Template Page Maker
- Advanced HTML Editor
Also, you can sign up for a free cobrand account and offer the same features listed above to your members as a subdomain of your account, with 50% of the ads. Pay options for this are $20 for 30 Gigabytes of transfer with discounts in bulk.