First things first, Home is not a game. It's Sony's answer to Xbox Live - ie, an online network. Nor is it just a "game lobby". Yeah, you can jump straight from it to multiplayer games, but that's not it's sole purpose.
Rather than being text based, it's a full virtual world, the idea being that you are a physical presence on the system.
As for having to pay for more items, and bigger houses and what not... how else will it be kept free? Sure, Sony have non-intrusive in-Home advertising, but they need some form of income from it, too. But think about it - Clans will be able to have their own virtual clan house where they can all meet, and all chip in for furniture. Socialising to the extreme.
I haven't the time to go into everything about it, but I will post an in-depth IGN. Please read it, or at least skim through it.
IGN: Home Preview
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Joystiq broke the story last week and got banned by Sony from future interviews etc before they did a U-turn.
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Kotaku. Not Joystiq.