Is it legal to make money by selling free software or make money from free source code?
If you sell free software for money is it legal? (Assuming somebody would actually pay money for buying free software).
Also i was wondering if you make tweaks to a free code (let’s say it’s a free mmorpg) and use it on your website and make money from member registration or advertises? Is it legal?
Thanks.

First of all, you need to read the license associated with the software. It should lay out the bounds of what you can do.
In general, you cannot sell the software. You can however sell associated services, such as burning it to CD for distribution, consulting on its use, setting up a web site using the product, etc.
In your example, if you are hosting the application, then you are selling the hosting service, not the software itself.
Disclaimer: I am not a lawyer nor do I play one on TV. Just an experience software professional.