I guess the question is whether that's urban legend, anecdote, or fact. In order for the colony to survive, it would first have to pass through the chipper, then spend a day or two in a blazing hot pile (it heats up really fast). And, even if a few termites found their way into your yard, my understanding is that as long as the mulch is a safe distance away from the house it's a non-issue.
There are lots of things that the detractors say about free mulch. One thing I hear a lot is that it introduces lots of weed seed into the property. Well, it's been a 2 or 3 years, and the only issue I've had is the multiplication of millipedes (which feed on decaying plants).
Yah, that can get pricey. You should track down a tree trimmer. You can get like 15 yards of mulch (shredded tree trimmings) for a $40 tip :-). The tree trimmers have to pay like 70$ to dump their load of chipped trimmings, so they'll gladly dump it off on your driveway. Just make sure the guy knows what he's doing and that he can give you quality mulch (without palm fronds). 15 yards is roughly 3 pallets of home depot cypress mulch, and I actually like the tree trimmings better because it decomposes 4 times as fast. I dumped over 200 yards of it on my backyard. It's great stuff. But be forewarned -- your home will be INVADED by millipedes! The millipedes make quick work of tree trimmings, but will begin to invade your home looking for more. They also like to burrow up into potted plants to eat away the organic matter :-).
An exterminator once told me that wood chips were a major source of termite infestation for homes. I'm afraid of termites being in that "free" wood chips. At least the stuff from the SWA has been composted and passed various health tests.
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). I asked Richard what it was. He said it is from a white illama and its taste is very similar to a cherimoya of high quality/flavor.