Disregard the binary “free speech” label. Focus on “freedom of speech” instead, since it’s easier to see what goes on with it.

Nobody has full freedom of speech, but you can have more or less of it. It is desirable, and you want to maximise the freedom of speech of everyone.

There’s a catch, though: sometimes enabling more freedom of speech to certain actors means you’re removing freedom of speech from other actors - by forcing the later to leave, by silencing them, by preventing them from reaching a willing audience, etc.

With that in mind:

It’s become really hard to tell what something like this actually means. Does free speech mean [being able to speak out against authoritarian power structures]¹? Or does it mean [throwing slurs and hatred around]²?

It’s both. However:

• #1 is about giving more freedom of speech to a lot of people who barely have some
• #2 is about giving a few individuals freedom of speech and silencing the target of their slurs and hatred

So if you want to maximise freedom of speech, you need to allow #1 and disallow #2. Or like you correctly said, it makes #1 worth defending and #2 reasonable to limit.

The fact that they just typify it as having a free speech policy without qualifying what that means makes my skeptical.

They qualify it in the wiki, and it includes #2:

[…] You will not be banned for anything you say, aside from spamming. This includes but is not limited to: // Swearing; // Personal attacks; // Racial or cultural insults; // Asking to be banned.

Intentionally being insulting or offensive will be treated as an open invitation to PvP, and as such will not be protected by rules against PvP “bullying”, since you will be considered to have invited it. So long as you continue being offensive, other players are free to respond with PvP.