Absolutely, one needs to be careful in deciding when it makes sense instead of blindly freecycling everything. The success of the model depends on its widescale adoption, i.e. if you can find stuff nearby. I think they are headed in the right direction, as the article mentions "People post or email about what they are seeking to get or give in their Freecycle groups, which are broken down by geography so members are basically communicating with neighbors."
Not sure about total junk, but the stuff that is useless for one and usable for others, can be efficiently exchanged between neighbors. We don't even need to look at it from a social work perspective, it makes economic sense if can be done at large scale.