“It is my understanding that 100% reserve banking would not become preeminent in a free banking scenario due to the simple fact that bad money generally drives out the good and the temptation to make easy money with FRB is just too much for many to resist.”
Bad money doesn’t drive out good money. If you’re referring to Gresham’s Law, the correct way to say it is artificially overvalued money drives out artificially undervalued money. In the case of fractional reserve bank money vs 100% reserve bank money, there’s little reason to believe either are artificially over- or undervalued (mainly because there is no state to set an arbitrary ratio between the 2) therefore neither money would drive the other from circulation.
Also, the definition of what is “good” money and what is “bad” money is arbitrary.
Now it could be the case that one kind of banking is indeed a better business model, thus leading to the adoption of that kind of banking on the market, but that isn’t quite the same as saying one kind of money is driving the other out of circulation.