The characters in the Odyssey are definitely not free to be you and me. Their destinies are just that: destiny, and there's not much room to change what's going to happen. Still, there is a way to change how they get there. Fate and free will aren't mutually exclusive, and even the gods have a lot of leeway in how they bring about what's fated. (Not to mention that they're subject to all the same fickleness of human emotion that we are). Add it all up, and you get a pretty flexible notion of just what "fate" means.
In The Odyssey, fate never seems to bring about anything good.
In The Odyssey, free will is simply an illusion. Even the choices that men make are guided by events outside their control.