This was a UI problem. The "Execute Real-time Monetary Transactions" must be UNCHECKED for "free membership signup" pages. However, this form field is hidden when the "Contributions Section Enabled" field is UNCHECKED. For Mike's case, both must be unchecked.
If we move the "Execute Real-time Transactions" checkbox to the top if the form (where it belongs). That should fix things.
— Original Post ----
When configuring a CiviContribute page in 1.7, free memberships no longer work. That is. memberships that use CiviMember profiles with a $0 fee. These were working in 1.6.