Maybe you could avoid the thornier issues entirely by outlawing the adtech industry instead of free services. With the backbone of surveillance capitalism out of the picture most of the free services would stop existing or move to pay models anyway. Worthwhile free services like the internet archive and wikipedia that aren't spying on users could continue to exist without worry. We'd still lose youtube I think, but maybe video hosting isn't best centralized either.
yes, I think that's a good idea too. and possibly easier to achieve.
I don't think advertising is inherently bad, and at some point you get ambiguous about "is this advertising or is it just describing something so I can find it in a search engine" and it's literally impossible to eliminate it all. and being able to tell people with problem X that solution Y exists can be a good thing, in moderation. it's more that the current maximally-invasive insanity and e.g. tons of highly distracting billboards are probably a net loss for humanity. São Paulo shows that it's quite nice without it, for example.