1) As others have commented already: The product was free with basically _all_ features already working. Sure, it might need some work to support a complete new runtime version (i.e. 4). I don't know. And, problematic in this case for the image here is that this is a mostly "invisible" improvement. You still wonder "What do they actually add?"
2) Their "update or stop using" policy is sleazy, imo. I stopped using the tool at that point, because in my world that's not a viable way to offer any product (free or otherwise).
3) Taking over a free tool with the clear and open statement that "it's going to stay free" bites you, if you back off later. I'm sure there are good reasons (commercially) for this decision now, but it still ends up as a public "Whoops, failed" for me.
No love from my side, not because of the price (I agree with you on that point), but the "image" of this tool is utterly damaged in my world.
I only hope they don't timebomb the paid version like they did the freeware version.
For fun and profit, peek into some Silverlight containers and run Reflector on the DLLs.