Maybe set C so that a standard 1BTC transaction can get into the main free area on the next block. And a .1 can get in after waiting about 10 blocks. And make the area which allows [age]*[value]/[size] < C to let in about a dozen transactions or so.
I just uploaded SVN rev 185 which has a minimal priority requirement for free transactions. Transaction floods are made up of coins that are re-spent over and over, so they depend on their own 0 conf transactions repeatedly. 0 conf transactions have 0 priority, so free transactions like that will have to wait for one transaction to get into a block at a time.
Version 0.3.15 doesn't write transactions using 0 conf dependencies unless that's all it has left, so normal users shouldn't usually have a problem with this.
I think this is a good compromise short of making the default fee 0.01. It's not so much to ask that free transactions can only be used to turn coins over so often. If you're using free transactions, you're taking charity and there has to be some limit on how often you can use it with the same coins.
We've always said free transactions may be processed more slowly. You can help ensure your transactions go through quickly by adding -paytxfee=0.01.