HyperWebEnable is known to be providing such services from quite some time now, and offer a free domain (www.yoursite.com) with a CMS installed (e.g WordPress, Joomla etc.).
Unlike Blogger, where you get limited templates, HyperWebEnable offers many themes for all CMS, and if your favourite one isn’t there, you can always request for it. I gave them a try few months back, and signed up for freewebhostoffers.com, which is now inactive because I never got time to work on it. The registration process went smooth, ignoring the part where they took 4 weeks to register and accept my domain.
You get full control over your blog and can also make money by monetizing it. HyperWebEnable has their own affiliate program which pays you a dollar for every new friend who registers with your reference.