2)It says running is a free action I assume that walking is also a free action but doesn't incur the penalties associated with it?
You are correct.
It's actually
better than a free action.
To walk or run, the character must declare it during the Declare Actions part of his Action Phase. Walking does not take up any action, but running requires a Free Action.
Emphasis mine.
Reason this matters? You only get
one Free Action per initiative pass (assuming you don't trade in a Simple Action or two for extra Free Actions).
The acting character declares his actions for the Action Phase. He may take two Simple Actions or one Complex Action. ...
The character may also declare one Free Action during either this Action Phase or on any subsequent Action Phases in the Combat Turn.
During his Action Phase, a character may take up to two Simple Actions or one Complex Action. An extra Free Action may be taken in place of a Simple Action (so the character would get two Free Actions and one Simple Action, or three Free Actions, instead of one Free and two Simple Actions).
Emphasis in the original.
Example: In one initiative pass, Sammie the Samurai does the following:
Walk (no action) away from the Knight Errant, giving him the middle finger (
Gesture, Free Action) while aiming her Ares Predator at his crotch (
Call a Shot, Free Action) before firing (
Fire Weapon, Simple Action). This uses up all her actions while letting her move farther from the officer.
The KE Officer, after being shot at, decides to
run (Free Action) away, down the street, while yelling into his commlink for back up (
Speak/Text Phrase, Free Action). Now, he has a single Simple Action to decide what to do with, possibly
Drop Prone (Free Action) behind a convenient dumpster in the nearest alley.
Mind you, in both of my examples, the characters trade in one of their simple actions for an extra free action.