If those free dictionaries are in .pdb, they were probably made for the old version of Pleco (1.0) with our old MakePlecoDict utility, and won't work with version 2.0, which is what our iPhone software is based on.
At the moment, there's not any way to get a non-Pleco-created dictionary into our iPhone software. However, the next iPhone update should include our user dictionary feature, which lets you create new entries right on your iPhone, and includes the capability to import entries from a text file (formatted the same way as with that old MakePlecoDict utility, in fact). There are already a few user-created Pleco dictionaries floating around in that format (file extension .pqb), which should work just fine on iPhone once we release that update, and you can easily create others with that import function. And as of the latest Palm/WM update, user dictionaries should stay nice and fast even in dictionaries with tens of thousands of entries. The one limitation is that our user dictionaries don't support full-text search yet, but that should be coming in a future update (actually very easy to add, but for a number of reasons it would be a bad idea to do so until we officially drop support for Palm OS).