How would I Practice .NET at Home (gratis)?

There are (free) express editions of Visual Studio and SQL Server 2005/2008. And you don't need any servers to develop ASP.NET applications - you can do this on XP/Vista as well.

You will only need to pay for a hoster if you want to make an application publically available.

Please also have a look at the following question for some similar information: Does Learning C#/.NET Require An MSDN Subscription?

Update: As an alternative to a commercial hoster (e.g. to temporarily make one of your applications available to others), you can host them on your PC and use a dynamic DNS service (such as DynDNS) to make your PC accessible from the internet. Although (as Robert mentions in his comment), permanently hosting a web application in that way might be a violation of your agreement with your ISP.

Personally my home computer was beefy enough for running games that I found that I could create a few virtual machines pretty easily. Microsoft has 90 day trials for just about everything which is perfect if I'm just creating throw away servers and projects for learning. I'd just kill the virtual server and rebuild it from scratch after the trials wore out.

But since then the Express editions are out and they take care of everything you really should need if you are just doing this to learn. I would have killed to have something like that when I was teaching because the price point was so high for people to learn. They have everything you need to really grasp the important aspects of .NET and Windows development. They might not have some of the fancy bells and whistles, but I think most would agree that not having some of those tools will only make you a better developer down the line. They are there to save you time once you understand what's going on behind the scenes, and really don't take much time to learn if you're that worried about it.

Eventually I just bought the MSDN subscription. I was building enough stuff at home to warrant the expense. But until you can afford and justify the cost, then you really don't need it so I wouldn't worry about it.

Someones gotta suggest MONO.