How can I tell iTunes to always download free updates
As far as I know, although both iTunes and the iPhone/Pad check automatically for updates, you have to manually start the process. 

Yes, I know it’s a bad idea, because we almost always click “download all”. Even if you tell iTunes to remember your password, it won’t start the download automatically whenever there are updates. I have been looking for a way to do this since the iPhone 1G and haven’t come across a solution yet.