I do have a tutorial for that, and use baking on my garments often. And yes, I did write a tutorial on it- not a great one, but I tried.
It is true that with baking process, the output is a flattened image. I and every other texture artist I know still goes through the complex-psd process for the bases that go into the channels that will produce the render. In most cases with baking, not only are you producing a color map but also maps to control specularity, light diffusion, and bump levels- so in theory, for light-baked maps, there should be a pretty obvious image trail to support the production of the final maps.
In this case though, the fine point is really in the whole distribution argument. Questions of derivative or not aside, it seems pretty clear that distribution was prohibited per the liscence.
-Nephi
(oh yeah. Cris can you PM me about options for resetting the email adress that my Nephilaine Protagonist account is using? I can't remember which one I used and I think it may be the one I don't have access to anymore)
Edit:
Those group messages were scary.
Edit Edit:
Yep Modo was made by a bunch of people who, if I recall correctly, got fed up with Newtek (they make LightWave 3d) and left to made a better product.
Edit The Third:
Yes, ogling a shape you are wearing in world is occasionally useful. Otherwise you are baking to what amounts to Ruth- not the optimal situation. Ogle records the mesh plus slider deformations, so it comes in handy when you are doing garments with loose sleeves, ect.