If what your saying is true then "hasFreePassengerSlot" would always be true as they are not even mounted on it for someone to ever be sitting in it.
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1st: It is true, and he even explained what the API function returns.
As I guessed before you need to take it in combination with the 1st parameter "isMounted" to find out what exactly is happening here, as the other 2 params only relate to the collections.
2nd: The 3rd param "hasFreePassengerSlot" should have these states, on the following dependencies:
Multirider mount selected in collections / Owner unmounted: true
Multirider mount selected in collections / Owner mounted: true if a slot is free, false if someone else is riding along as a passenger on this mount already
Multirider mount not selected in collections / Owner mounted or unmounted: false
At least that is what I'd assume.
And if this behavior changed in the past, which always is possible, then I guess Dan's answer is still valid and true: Current version returns what he described.