Development for the low-cost board "STM8S Discovery" using free IDE and compiler is possible! After experimenting with Eclipse I ended up with Code::Blocks. For the time being SDCC is probably the only open source compiler capable of building stm8 code. The installation procedure and some supporting files are included in the attached zip file. In lack of a proper license agreement for STM's "Standard Peripheral Library" I cannot freely publish the whole SPL source code; You will have to download it on your own from STM. Just extract the inc and src folders and follow the instructions included in the attached zip file.
: Edited by Admin
This blog entry describes in detail how to configure Code::Blocks to run with SDCC and STM's toolchain: http://blog.podstuff.de/setup-codeblocks-for-stm8s-discovery/
I also tried ASM and C with different ide. The SDCC + stm8flash solution is the easiest to setup on linux and osx. The STVD + Cosmic on the other hand gives you all the power of ST debug tools. I only bought the 1$ "chinese cheap" board + STlinkV2 dongle.