No. There are so many people who are so deliriously happy to pay for online just to spite "the haters" that Microsoft would be foolish to pass up that free money.

exactly

if it wasnt for xbox live, I don't think the 360 would have profited at all this gen

Where did you read that from?

I would love for them to do it but I don't think its a smart move for them. I just don't see microsoft giving up on selling basically 1 extra first party game a year to a very large portion of active xbox users. No matter how many other features they add if they drop pay to play online the subscription base will plummet. Those lost subscriptions being negated by the increased sales of the system is very unlikely, especially if the system is getting sold at a loss.

This is a quick example. Let's assume dropping paying for online increased 360 sales by 10mil up to this point and even significantly increased the software attach ratio, but lowered the subscription base dramatically. Most software sales are third party so the money gets split to a lot more entities, but money from xbox live gold is only split between the retailer and microsoft.

Typical year

80million 360 install base, buying an average of 2 games($15 goes to microsoft) and 1/2 of them paying for gold($50 goes to microsoft) =$4.4billion

90million 360 install base, buying average of 2.5 games($15 goes to microsoft) and 1/10 of them paying for gold($50 goes to microsoft) =$3.915billion

Microsoft still gains more money from keeping multiplayer pay to play only. It would take a massive increase in install base or software attach ratio to negate lost gold revenue.

They could and probably will try to add more value to xbox live though. 

I ONLY HAD GOLD FOR 1 YEAR BUT I PAYED LIKE 20 DOLLARS then i went back to playstation 3

It wouldn't be a smart move financially, but then again, making it free could help sell more units. I honestly think they should make Gold more attractive to people living outside the United States cause currently I pay $60 a year just to play online.

It would definitely help them silence one of the only remaining arguments from the other 2 big systems.

And in a sense, I think it would work very well. Current gold members are not likely to downgrade to a free plan that has very limited functionality other than Online Play. I'm sure they will also gain more Gold members as people get a taste of online play on the Xbox and want more of the advanced features. It would also bring in more customers who were somehow bothered by $40-60 per year in the service and just wanted to play online. More consoles sold, more games sold, more profits from those 2 things. More potential "Gold" subscribers.

That being said, I doubt that would happen. I see them making the base Gold sub more feature packed, or offering a cheaper sub level but still not free.

If you want to take this to the extreme, Its exactly the same strategy Nintendo has with Japan. Yet, flames for Nintendo and thumbs up to Microsoft. Mind boggling...