  Applying integrated sensing and communication (ISAC) to a cell-free massive
multiple-input multiple-output (CF mMIMO) architecture has attracted increasing
attention. This approach equips CF mMIMO networks with sensing capabilities and
resolves the problem of unreliable service at cell edges in conventional
cellular networks. However, existing studies on CF-ISAC systems have focused on
the application of traditional integrated signals. To address this limitation,
this study explores the employment of the orthogonal time frequency space
(OTFS) signal as a representative of innovative signals in the CF-ISAC system,
and the system's overall performance is optimized and evaluated. A universal
downlink spectral efficiency (SE) expression is derived regarding multi-antenna
access points (APs) and optional sensing beams. To streamline the analysis and
optimization of the CF-ISAC system with the OTFS signal, we introduce a lower
bound on the achievable SE that is applicable to OTFS-signal-based systems.
Based on this, a power allocation algorithm is proposed to maximize the minimum
communication signal-to-interference-plus-noise ratio (SINR) of users while
guaranteeing a specified sensing SINR value and meeting the per-AP power
constraints. The results demonstrate the tightness of the proposed lower bound
and the efficiency of the proposed algorithm. Finally, the superiority of using
the OTFS signals is verified by a 13-fold expansion of the SE performance gap
over the application of orthogonal frequency division multiplexing signals.
These findings could guide the future deployment of the CF-ISAC systems,
particularly in the field of millimeter waves with a large bandwidth.
