We are also running on Dreamhost's free non-profit plan. Haven't had any issues (that we didn't cause ourselves).
You get all of the perks and the power of a paid plan, but it's free. What more can I say?
We get our domain, unlimited disk space, and unlimited bandwidth.
Here's the information on their nonprofit discount.
We used 1&1 for a few years at a cost of something like $3 a month, but we got more free with Dreamhost so we switched. No complaints with them either if you really want to give someone money.