Yes, 7-Zip is free software. You can use it on any computer. You don't need to register or pay for 7-Zip.
You probably used a *.* wildcard. 7-Zip doesn't use the Windows system wildcard parser; so, 7-Zip doesn't follow the archaic rule by which *.* matches every file name. 7-Zip treats *.* as matching only a file name with an extension. To process all files, you must use a * wildcard or just omit the wildcard entirely.
Support for ACE can be implemented, if the source code of that format is made available, and if the source code license will allow using that code.