The name of the Free crop box in the Extract destination dialog box may misled you: it is not about allowing user to change the proportions of an image, when replacing an existing image in an article.

The purpose of the Free crop box is another: in a system that offers a series of presets, to let the user to select "manual crop" and not the preset one.

The "level of freedom" in such case depends on the current situation. By default, if you are dragging a wire picture over a dummy picture, it will allow you to select the picture part, but it will maintain proportions - you cannot change them (unless changing the default way it works). If you are dragging a wire or editorial picture to be added as new to an article, then you can select the picture crop as you want, independently of the "Free crop" setting.

Changing the default way of work

You can edit the custom override of the ReplacePictInArticleWithCrop in the way it doesn't set the width and the height, and so the crop becomes really "free".