Of course RMS understood the overtone perfectly, but Vrije Universiteit (vu.nl) is the real name of the university. Its name can be translated to "liberated university". As I understand it, it's a free university in the sense that historically, students of all religions were eligible to attend, as opposed to e.g. Katholieke Universiteit which was Catholic.
Yes. Absence of direct control by the government. The VU was founded for religious reasons, so the main goal was to be able to teach theology according to the particular type of protestant Christianity that the founders of the VU believed in.
https://en.wikipedia.org/wiki/Vrije_Universiteit_Amsterdam