The Guardian article is speculating about academies, not free schools.
Free schools are not allowed to select on academic ability.
They will have selection criteria like any other school, ie looked-after children, catchment area, siblings, etc. They can set aside a certain number of places for religious affiliation and talents. Some schools will have limited appeal, eg curriculum delivered in a foreign language.
What independent schools can do when they convert to a free school is keep on their existing pupils. Ahead of the change, they may recruit new fee-paying students in order to make them eligible for a free-school place.
The profile of the school is likely to go through many changes. At first, those families who would never in a million years use state schools will leave, so that the remaining pupils from the old school are those who struggle to pay fees but value education over most other comforts. Any new fee-paying families will be in a similar category - they can't afford school fees long-term but can dig deep for two terms. After that, it is open to the demographics of the catchment area.
At first, the changes will be small as new pupils join the school to take class sizes up to 16 or 20 (whatever size the classrooms can hold). The school will be similar to most other schools in the area as their class sizes go up to the inevitable 30.
I would take with a pinch of salt that the government invited the school to apply, and that class sizes are limited to 20. The government isn't going to know anything about your school, although the LEA might. 20 isn't feasible based on government funding. There will be a transition fund for about five years to cover building work and small classes, but after this time, the school will be expected to have 30 in a class.