Correct, well you will still be paying for the 'free' domain indirectly through your hosting fees, but you will not be charged any extra fees for the domain. Once it has been transferred away, any costs you incur for that domain will be from your other registrar.
Note; If you take advantage of the 97 day money back guarantee, you will not be refunded for the cost of the domain, you will instead be refunded whatever you paid for the hosting, minus a $9.95 fee for the domain.
Also, even after you have transferred the domain, you will still receive the one 'free' domain credit per year, what you do with this credit is your choice.
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