what's being given out for free is an updater. You need a full install, then you apply the update. This should also be downloadable if someone is willing to give in to the heavy bandwidth demands. This could be an interesting grass roots distribution phenomenon.
The up to date progam requires proof of purchase because it's a new OS installer. You don't need to already have 10 installed to put on 10.1
Granted, all I've read is documantation and legalese, so I could be 7 miles off the mark. But that's my understanding of the matter. So redistribution of the free thing shouldn't be an issue. Personally, I wish I could find my friggin' reciept because my original install CD is so scratched it won't install anything anymore. I need a new one that can install from scratch.
You can let people see your OS, and play with it, but lending out your CD is dangerous for the longevity of your CD. Grrrrrrr.