As far as Yvonne "There's A Party Going On" - go straight for "Omar's Oh-Oh-El Beats" - awesome cut up edits by Omar Santana.
For me the coolest thing about freestyle is the 30 seconds where the engineer goes wild with tape edits (or later Emulator). The king of this was Chep (the Dominican) Nunez (the baddest latin in manhattan), also Diamond 2, Latin Rascals, Omar Santana etc etc.
Freestyle later got overtaken by house - first there were freestyle tracks with the odd house mix on the 12, then the house mix became the A1 track, and finally the freestyle mix disappeared. This is what was happening by the time of "There's A Party Going On".
Biggest hit which few people remember the original freestyle version - "You're Gonna Miss Me" by Turntable Orchestra. Most people remember it as house or garage but the original mix is pure freestyle.
Then there was the more hardcore/dubby side of freestyle from people like Todd Terry (as Orange Lemon, Masters At Work, Fingertrips) and Frankie Bones et al.
Labels to check: Cutting, The Fever (catch it), Metropolitan, Midnight Sun, Next Pateau (just for C-Bank).
The Best Of Latin Hip Hop is a good intro for UK people because not much freestyle got released over here (basically just Shannon and Joyce Sims).
Pet Shop Boys and (even more so) New Order were highly influenced by freestyle - New Order even got Arthur Baker to produce for them (Baker's ex-wife Tina B's "Honey To A Bee" is a classic).
As far as Chicago House crossing over with freestyle, I would say that the NY scene was overtaken by house. Not many tracks came out of Chicago with a freestyle (electro) beat, just a few like Chip E's "If You Only Knew".
So not that much influence of freestyle on house, only the other way round I think.
I'm also interested in the crossover between freestyle and Chicago house...Liz Torres often gets mentioned in both contexts, it seems
Possibly you are mixing up Liz Torres with Judy Torres?