0.001 BTC at today's exchange rate is uncomfortably close to the estimated network-wide cost of processing a bitcoin transaction (which is about 0.001 US dollars).
The danger is a flood of micro-transactions that keep everybody's CPUs busy, driving up that hidden cost and, eventually driving people to stop running bitcoin because the costs aren't worth the benefits.
Also: lets not confuse the "how many free transactions" with "what is the smallest transaction amount you can send."