What I would like to do is, when a user registers automatically place them in the free member group (which has access to a limited number of items (specific forums and modules, etc)), how can I auto-assign members into groups when they sign up, is there a way?

When a user registers they automatically go to the registered user group. It i up to you how much of your site you allow them to access via your settings. Now if you want to create a higher level group - say a subscribers group for people who pay to have access to more then you need to create a new group and call it 'subscribers' and in your group permissions you can give them more access.

As to the question of automatic direction into one group or another it is probably possible (i am not an it's imposible person) but difficult and would require the support of a coder/developer. (I don't know if a module/hack to do this exists but you can search - there may be a subscription module that might do the trick) I think it would be easier to manually move a person who registered for free but paid a subscription to a subscription group once their payment is processed. You will see in the create a new group, or edit a group you can manually ad users. What you will need to know from the user is their user name. HTH