This one tripped me up as well.
Go into the General Settings page (General Options) and look for a line that says "Minimum allowed order total:" and set it to zero.
Now, the cart will allow the purchase of a zero priced item. But it will also set the order status as "Queued" rather than processed as most of us would hope.
It would be nice if the X-Cart developers would give us a setting that determines what status to give a zero priced order.
As far as the "Enter Your Price" thing, I explain it to my customers that this is to give them the option of donating an amount for the free items, and that they are not required to enter anything into that box, or that they may enter a zero into it if they prefer.
I have had some customers enter a donation amount for some of my free items, so it's a good option to have.
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