I'd go with A, B and C being true, and since D isn't true/false, I'd say "maybe for a while" and then "probably yes."
To my way of thinking, they are indeed trying to ramp up sales, and doing so by trying to generate interest in non-iPod products within the non-Mac community. Free songs gets the attention of the self-described "young and hip" market segment (though the definition of "hip" is always subject to debate).
Generating a run on a product you're about to replace does two things: it reduces inventory and creates demand-which can only be satisfied by the new product.
I don't think that the Express has made much of an inroad in the non-Mac community, but that is only because it's an Apple product and people are used to Apple stuff only working with Macs. Give it time...