I don't think launch costs are the dominant expense in space telescopes. I think most of the expense is technology development for one-off (or small run) instruments as well as paying the people who design and build it, write the software, and operate the telescope. So even if the launch were free, there's still a huge expense in building space-based telescopes. I believe the rule of thumb is space-based costs ~10x that of a ground based telescope.
The largest astronomical mirror in space is 3.5m (Herschel). 30m optical telescopes are being built on the ground now and 10m telescopes have existed since the early 1990s. It would be incredibly expensive to put a 30m telescope in space, even if the launch were free.