We actually stayed in the city park in O'Neill last September. It was a nice experience. Four years ago we stayed at another "free" city park in Dumas TX, that one wasn't as nice as O'Neill but still suited our needs.
That first time I was a bit skeptical so I called the Dumas chamber of commerce, the guy that answered was very nice and explained it wasn't a "scam" or anything and that it was safe. I remember seeing a patrol car at least twice the night we stayed there.
I'd stay at them again given the chance.
Dan