Hey, I can tell you that in general publishers for example expect around 5% conversation ration on free-paid games. However as for puzzles I do not believe that this is the best model, people are not that keen on buying puzzles, maybe on iPhone only if you are in top already, but not android. I would rather recommend you to use ads. Ads are well paid in America, UK and Europe and will generate revenue constantly when people play your game.

Depends on the type of puzzle game. I have found logic puzzles to have a similar conversion rate to yours and I have done exactly what BlackCorsair has done and made everything free but with Ads.

However for word puzzles and trivia games I have found the conversion rate to be much much higher and the reviewers have actually asked for more in ap purchase packages.