ACL gives you the biggest control over a lot of content, but there's some things ACL can't cover. More specifically things like changing a field value, tracking affiliates, or controlling access to a URL or part of a URL. All of those CBSubs would have to control. I would, for ease of use, configure as much as possible to be ACL based.

Having a free plan is based entirely off what your needs are. If for example you want them to select from 1 of 3 plans (1 being free), all are set to exclusive, and you need to control access to content with the free plan (e.g. free users can see XYZ, but public users can not) then you may want to create a free plan to handle that scenario.

How do I set a subscription that lapses to go from a paid plan down to Free (or another plan?).

You can't really enforce that unless the paid plans are child plans of the free plan. Currently you can not specify the fallback plan. CBSubs has basically an internal free lifetime plan (you'll see the radio for it in backend when editing a user), but you can't currently specify for it to fallback to a plan you've configured. Best way to enforce this is CB Auto Actions subscribing them to it when XYZ expires.

What I do not want is to create the user as a free/paid subscriber at the beginning which then unsubscribes paid (leaving free only), as I have different page access set for free & paid and I do not want paid to see some of the free?

Depends on how you're handling the access. If it's a usergroup that you promptly take away from the user when becoming paid you likely don't need a free plan.

It's not recommended to reparent plans with active subscriptions. If you are not using auto recurring it should be fine, but recurring subscriptions would likely break on renew.

I did see an old post which indicated that the invoice will show both free plan and the paid plan - is this correct?

Yes.