1) For all intents and purposes it is free. Why more people don't use it is the subject of many debates. Once you get into it I'm sure you'll see why for yourself.
2) Yes? Was that a question?
3) WMP: no. Real Player: I think there is a linux version. Quicktime: don't think so. There are media players that play most (all?) media files you will run into. Xine, Totem, etc. Look around, there are plenty of alternatives.
4) There is virtually no threat of virus due to the way the kernel is structured. Code cannot be executed with root (administrative) rights unless you speifically run it and type in the root password when prompted. You could also say that since the source code is available to everyone, there are more eyes looking at it and therefore more people to make sure there are no major vulnerabilities.
Spyware is along the same lines. It cannot execute at a runlevel necessary to cause damage without specifically supplying it root credentials.
As always, if my info is incorrect please be nice with the beatings.