Can I use Arduino Software and IDE for development on Freeduino Atmega 328
If the "Freeduino" (no idea what that is) uses the Arduino bootloader and is connected via some form of UART interface to the same UART pins as the Arduino, then yes, you can.  The Arduino UNO uses the Atmel 328P chip as well, so you could use that.

The only possible issue might be with the oscillator configuration - if this Freeduino thing uses the same oscillator arrangement as the UNO then you will have no problems.