I think you may be applying a very weird definition of "free software", even compared to the usual gratis vs libre axis.
Also, I really don't think controlling a domain name NFT in a system that's mostly computers you neither own nor control constitutes "more ownership" than the IRL law and contract bound rental world we currently live in. Especially if all the requirements and outcomes (payments for control resulting in land grabs of valuable names) are the same as our current system.
Maybe not more ownership by the owner, but certainly more ownership by the user, which is what's important. If there are multiple blockchain-based alternatives, I can choose which one to resolve with; it's also essentially built-in namespacing (with each name marked with its resolver.) And although I'm personally very crypto-negative, a distributed ledger is exactly what I would want to make sure that any nodes that I use to resolve a name on a particular registry are trustworthy.
The throughput problem that poisons cryptocurrency becomes irrelevant when we're talking about something that's as naturally long-lived as domain names. Every domain blockchain can have its own gatekeeping process; one can sell names for thousands of $ each, and another can give away thousands for a $. They can require that domain owners have a camera pointed at them personally for 24-hours a day or be revoked, or they can hand out infinite names through a onion-routed API.