I understand that Apple restricts the distribution of "free apps" that are essentially crippleware. By this understanding, the current demo version of Pleco would be prohibited from being distributed as a "free app". It also seems to me that a huge portion of the cost of this software is the license fees that must be paid to the content owners of each dictionary.
How about harvesting the power of open source to create your own content (i.e. E-->C and C-->E dictionary) and including it as the dictionary that comes with the Pleco free app? Perhaps you could limit the dictionary to just the HSK Level 1 words/characters list, or perhaps some other most frequent word/character list. I would think that the HSK Level 1 data is freely available so that you only need to get open source contributors to come up with simple and useful example sentences to be included with dictionary entries. As your potential contributors likely already own your product, you may want to consider giving significant contributors a free crossgrade as an incentive. If this idea takes off, you may go in the direction of including frequently used collocations, 成语, or, just simply, more commonly used words/characters. As a side note,I would love to see a notation with each definition representing if the word is (or to what degree) 口语, 书面语, 专业词, 古代词, 地方语...
I understand that being a dictionary content provider is not your focus (writing great software is), but perhaps you can utilize the skills of many to help you in creating such content and then distribute it for free in keeping with the spirit of open source and yet maintaining control over its use. To me the advantage is two fold: 1) to get a great "App Store" Pleco free app out there to distinguish it from the huge amount of junk that is also labeled as free apps (following the model of the ePocrates); 2) to provide unique dictionary content that is not available elsewhere. Both can achieve the goal of creating buzz, and if successful a dynamic community of Chinese learners that feel like they are part of creating a great, new dictionary that suits our mutual needs. To me one of the greatest strengths of Apple, both through its darkest days when Steve Jobs left the company and its current heydays, is its dynamic community of users. It is the community that carries the platform to great heights, and I'd likewise love to see such a Pleco community grow.