Right, so far my initial strategy is to offer a free and paid version of the games with the free version containing ads. I am also going to give the benefit of additional content updates free as part of the paid version. So extra levels, etc... will be released as updates for the paid version. Both versions will get bug fixes, etc...
As for the in app/micro transactions I haven't fully vetted my strategy on them but my thoughts so far are to only offer things that add to the game via in app purchase as opposed to making folks pay for items that are necessary in order to enjoy or beat the game which seems like a very shallow practice to me. So my in app purchases will be for extra characters, levels, etc... basically purchasing additions to the game as opposed to leaving out core functions like some games seem to do.
I just don't like games that purposefully remove features or block progress unless you use their in app purchases.