Why is a non fixed-length encryption scheme worse than a fixed-length one?
The encryption scheme in the experiment you describe does not have to be fixed-length. We simply require that the two messages the adversary sends to its oracle have the same length. The restriction is on the adversary, not on the encryption algorithm.

So why do we put this requirement on the adversary? The reason is that in every practical encryption scheme, ciphertexts leak information about the length of the corresponding plaintexts --- the longer the plaintext, the longer the ciphertext. So cryptographers basically threw their hands up in the air and said, "Fine, we'll just concede that length-information leaks. Can we make sure no other information leaks?" Requiring the lengths of $m_0$ and $m_1$ to be the same ensures that the adversary can't guess which one was enrypted simply by looking at the length of the ciphertext it gets back. Therefore the experiment you describe measures an adversary's ability to find some other way that information leaks.