How is the free market a good thing?

I understand the theory behind the free market; that it (allegedly) leads to healthy competition, higher quality goods/services, lower prices, etcetera, and that if the government steps in in any way shape or form (like anti-trust laws) then it will fail, and it will be the government’s fault.

However, it also seems rather idealistic, just like supply-side economics. The theory relies on informed consumers, suppliers playing nice, a lack of price-fixing and other forms of collusion, no attempts at a monopoly, and basically ignoring reality.

What I want to know is this: am I missing something here? Am I just being too cynical or is the system truly flawed? Is it humanly possible to have a self-regulating free market that actually works, or is Capitalism merely a nice idea that can never happen?