You can use only resources that are enumerated in Amazon "free usage tier" offer for free (mainly it is 1 Linux Micro Instance and 1 Windows Micro Instance without stopping for a year). You can install in your AWS account as many other instances as you want, but not for free.
there is a limit of creating instances. I think it is 20, and then you need to conatct them to increase the instance limit.
Yes, you can create more free instances, just make sure that the total time you spend for all instances is less than 1 month hours, otherwise, they'll charge you.