Er, Anne McCaffrey's work for Baen came, I believe, after this incident (since at least one work was, IIRC, a collaboration with Elizabeth Moon who was already a Baen writer by that point); still the preponderance of ms. McCaffrey's work, at least the f&sf part, has been published by DelRay (I don't remember if they published her romances or not - note, the romances are good reads, too). In any case, that was a story Jim told on himself and laughed about since, apparently, he wasn't alone since Tom Daugherty of Tor Books had reacted similarly.
Author's response
when you're tright, yuo're right. I don't know anything about her romances, as I thought the scene between Menolly wand Sebell in 'Dragonsinger' was kinda lame, so I never pursued that topic.
Alorkin