The illusionist service is free, as far as I know. I have only used it once, though, in Farglow, so I'm not totally sure.
Your thought that it is free only for the player is a good one. It could be a special recruitment drive for Dragon Slayers - kind of like a standard discount for army personnel?

- and as for the Dragon Knights, it would be sensible not to overcharge someone who can turn into an giant, firebreathing lizard anyway.
And the idea of everyone being able to change sex at any time, at the drop of a hat, is quite hilarious. Social structures would take a blow, even if they did not completely disintegrate.
...there was actually a case here in Sweden, where a student at some high school decided from one day to another which gender he/she belonged to - and complained to the authorities when the teachers didn't immediately acknowledge his/her current disposition!