After some extensive research there is no free software to convert the files. There are a lot of viewers and trail versions but none save to an embroidery format. The closest one that did is a Mac program called graphic converter which can save as a Mac Weavlet file but that proved to be useless. I also found a program on the Mac called Convert It by Macemb which says it will convert jpgs, tiffs all sorts of different embroidery formats to different embroidery formats. So I downloaded the trial and you can't save to an embroidery format unless you buy the software which is $150.00 so not bad but not in the budget.
My issue is not with the different software out their for embroidery but the lack of compatible standards with the rest of the graphic industry. These embroidery formats need to be opened up and made compatible with everything else. Much like with Print and Web (the difference being of course is resolution). Open standards with the rest of the industry would make software work better and converting files easier faster and cheaper. - imagine that!
This was my first experience dealing with embroidery shops and it left a nasty taste in my mouth, If I can avoid closed and proprietary systems I try to but I also realize that systems like Windows and the Mac OS are also closed systems and operate similar to the embroidery software shops only not as stringent. You need to have a cheap free way to convert to and from these file types. Thus far I know of none, but if I come across any I will share that information. I don't want anyone else to go though the experience I went though.
http://filext.com/file-extension/dst
Trevor