A composite free layer having a FL1/insertion/FL2 configuration where a top surface of FL1 is treated with a weak plasma etch is disclosed for achieving enhanced dR/R while maintaining low RA, and low λ in TMR or GMR sensors. The weak plasma etch removes less than about 0.2 Angstroms of FL1 and is believed to modify surface structure and possibly increase surface energy. FL1 may be CoFe, CoFe/CoFeB, or alloys thereof having a (+) λ value. FL2 may be CoFe, NiFe, or alloys thereof having a (−) λ value. The thin insertion layer includes at least one magnetic element such as Co, Fe, and Ni, and at least one non-magnetic element. When CoFeBTa is selected as insertion layer, the CoFeB:Ta ratio is from 1:1 to 4:1.