As your contract period is over then you can cancel your account anytime you like and they can't stop you.
As for locking your line, I have never heard of this before and I suspect this is just to frighten you. You could always check with BT to see if this has been done, or is possible.
I have been with Freeserve for about 3 years now and I am in the process of migrating to Pipex as I have abandoned freeserve e-mail due to the Spam problem. Two weeks ago I received more that 60 spam e-mails over night which is over the top.
I hope you get this sorted out soon. Sorry I can't be more helpful.