I voted for "free rein" because as you said, that seems to be the most logical. But "free reign" doesn't give me the horrible knee jerk reaction that an incorrectly used "prostrate" does, and now I'm starting to wonder if I've written it incorrectly myself. Hmm.

In related news, someone was complaining about the incorrect use of "blown pupils" the other day and it's been grating on me ever since.