"Activating this ability is a free action that is usually part of an attack or charge."
Usually means it doesn't have to be. And I would consider a breath weapon to be a form of attack, just not an attack action of the standard variety.
Used to be a note that they activated it when flying overhead. Actually, I think it used to be it only activated when they flew overhead, attacked, or charged.
But yes, technically your dragon can activate its frightful presence when someone forgets he's on the toilet and walks into the bathroom. He has to wait until his turn, but that's it.