Yes, I am sure it is *not* the fact that his content was free elsewhere, but more likely the weak association with the rights of the work.
I have two books published in KF8 format, (http://goo.gl/DkR4T) and (http://goo.gl/r6oDN), both also available as free non-KF8 epub/pdf downloads, and Amazon sent me a query as to the RIGHTS as (using some automated system I presume) they detected that the content was available elsewhere for free. I responded appropriately, as the primary copyright holder, and my material has remained published accordingly.
And for those worried about GPL, etc, content, as the author, you can specify NO DRM!