It shouldn't be doing that; it should be taking you to a 404 page that says "The requested URL /email/scripts/free was not found on this server." :P
You can make a bug report if you like, in case there isn't already one floating around, but as I recall, this has been a problem for quite some time, so it may simply not be high priority. I'd recommend getting a webmail account from a larger provider that won't experience such issues, like gmail, just to be on the safe side.
That just means the e-mail you are registered with on the SWC site (preferred mail address), not a holomail account. I believe it's a security verification that the person signing up really is the owner of that Handle.
"May the Grace of Ara go with you, and His Vengeance be wrought upon your enemies."