I did not close the site rule for 1 month, so is it free?lots of blog posts on google regarding namecheap taking down peoples adult related websites. you can read their TOS to get definitive answer. but looks like the answer is NO.
as to your VPS, depends what the provider TOS says.
namecheap is quickly becomming one of the worst registrars on par with godaddy. consider moving to namesilo for domains.
They sent me a message like.....free? no you still paid for it. you pre-pay for all services. no refunds.
free as in won't get caught? usually. i've hosted adult on services that explicitly say no adult. i generally got away with it for long time (years). eventually someone complains or systematic checks are performed that get you flagged.
best to use services that are compliant with what you are doing.