Can I use fat free milk instead of whole milk for a cake?

You can but the reason that whole milk is best is because of its fat content, it creates a richer, more moist cake, but there is no reason that you couldn't use fat free.

Yes! I do it All the time. You can even substitute a dairy-free option like soy or almond milk with no negative effects.

Sure. Whole milk is preferred, but non-fat milk should still work.