Saw an ad with google logo hawking free (1 yr) small business websites and domain.

http://www.gybo.com/

That's a pretty good deal actually. I wonder what the uptake on that is. I remember them announcing this some time ago, but I don't see much talk about it.

It's been in the UK for awhile now - http://www.gbbo.co.uk/

Not a great solution as it uses Google Sites which is limiting and very frustrating.
But it does open the door and gives businesses otherwise intimidated by the whole web thing a free solution to get a feel for it.