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I think free will is fundamentally a bad term/model, independent of the truth value of what everyone means by that label. That said, I think you might be somewhat conflating free will and consciousness; it's perfectly cogent, for instance, that a provably deterministic robot might have subjective experience; and that after executing each pre-determined binary instruction, would be programmed to have a feeling of "I chose that instruction".

I do think those who have a bias for materialism are overly eager to discard fuzzier subjectivities like free will, consciousness, even religious experiences and mystical states. There is obviously a sense in which Harry Potter is not real; but there is also a sense in which Harry Potter is more real than an arbitrary rock or tree, because as an ephemeral memeplex, that being altered planetary culture and created billions of dollars of economic activity. Just because a phenomenon lacks affordances for empirical measurement does mean it is necessarily absent from reality altogether.

For an opposing view to naive materialism which is still firmly nested in rationalist thinking, see Donald Hoffman's "The Case Against Reality": https://www.quantamagazine.org/the-evolutionary-argument-aga...

I think it's more about the approach taken for researching the hard problem of consciousness (what you basically pointed out; what explains the phenomenon of subjective experience for conscious entities?).

Most researchers are doing exactly what you said, looking at it from the angle of "what arrangement of matter" gives rise to consciousness?. This model follows our intuitions and should definitely be explored; I don't think anyone is arguing the contrary.

But there are others, like the cognitive psychologist Donald D. Hoffman, who are doing research from the complete opposite side of this problem: what if consciousness is a fundamental property of the universe? He explains this far better than I can (pre-caffeinated) in his book The Case Against Reality[1], which I'd recommend you read if you're interested in this topic (he's also done quite a few interviews which can be found on youtube et al[2]).

Perhaps similar to you, I (a materialist) used to have what I can only call a "gut reaction" to this idea - panpsychism just seemed like "new age bullshit" that was impossibly wrong. But I'm becoming more open, and honestly the science being done is really fascinating[3].

[1] https://www.amazon.com/Case-Against-Reality-Evolution-Truth/...
[2] https://youtu.be/4HFFr0-ybg0
[3] http://cogsci.uci.edu/~ddhoff/Chapter17Hoffman.pdf

One thing I've wondered about is the assumption that every possible universe exists independently, with an infinity of entire universes splitting at every fork (n states per picosecond per particle, compounding!); it seems to me that shared state(s) and a long-tail of micro-diffs (like git / Merkle trees / etc) could model the same phenomenon more efficiently/parsimoniously (disclaimer: not even slightly a theoretical physicist). This could potentially allow sufficiently overlapping states to merge, or exactly opposing states to cancel, yielding an equilibrium amongst the sea of micro-probabilities, converging either to a singular universe, or a much smaller patchwork of stable universes (either separate, or intertwined).

This parsimony question also overlaps the Simulation Hypothesis: the fact that most physical laws resolve at macro-scale, by aggregating probabilities, and only break down into odd behavior (where a particle seems to care whether or not you're looking), smells to this programmer like an optimization hack. :)

Just started reading Donald Hoffman's "The Case Against Reality", which posits some very bold answers to this question, theorizing that there is no reason to assume that base reality is anything like our perceptions (subjective or scientific), any more than there's a reason to assume the perception of a desktop icon has a direct relationship with its filesystem implementation. The implications of a "consciousness-first" rather than "matter-first" explanation of existence are staggering, and it isn't hard to set up a model in which that explanation is more parsimonious than Multiple Worlds.