Free flight: I would let the wings grow out. It's good for them to fly, it keeps them healthy. But since they are such small birds, free flight training could be dangerous because a hawk could snatch them. I would stick with letting them fly around your house, not outside.
This. Tiels are prey animals, and they survive in the wild by living in flocks. This ensures there's always lots of eyes watching for predators, and if a hawk or other predator DOES come around, the movement of multiple birds is visually confusing for them.
There are also other birds that aren't predators (crows, seagulls, mockingbirds, and more), but who will chase away strangers, and they'll take on birds much larger than a tiel. If your bird gets chased out of the area, it can easily get lost and unable to find the way back home. A cockatiel all alone outdoors is as fragile and vulnerable as a soap bubble. (Even on the harness, you want to keep a constant eye out for hawks. They've been known to snatch small animals right out of their owner's arms).
Flying indoors is ideal. All the fun and exercise; none of the death from above.