If you can take the risk, keep at it on the freelance until it DOES pick up to a sustainable level. It will take longer than you ever imagined, which is true of any business!!!!! If you can develop that freelance business, though, it will be worth it. Taking welfare,as you found out, pushes you toward remaining on the dole. The risk in your case is healthcare. Depending on your age and health, it could be a manageable risk.
Today, I talked to Adam Weiss, a guy who seems to have been in a similar position (PhD astronomy/physics, migrant post-doc scientist, no real jobs, career driven by government grants). He started a little one-man business doing demo videos for iPhone apps http://appdemovideos.com/
several years ago, and now he makes a nice living at it (expanded to Android and iPad). He's not getting rich, but he is OK, and is looking forward to bringing in some employees soon. He does beautiful work (and he told me that it took him years to perfect it... he just came up with a new technique for which he charges extra, and which is amazing). He's a 1-man operation (as am I now and for the last 12 years). I hope this has encouraged you.