I kind of get the sense Baez is being polite and humble there, not wanting to say something is nonsense if others seem to find value in it.

That said, I think I agree with Baez about the actual mathematical content of the paper. That is, the proof is fine, but the way they try to formalize "model" seems so weak as to be useless. The definition used in the proof is that R is a model of S if the state of S determines the state of R. There's nothing about preserving the fidelity of those states.

edit: Maybe the clearest way I can put this confusion is that a regulator based on measurement of the system it's regulating is a "model" per the paper. The authors choose a formalism which sounds like it was more common at the time that describes the regulation as a function of "disturbances"/inputs only. Through this lens their definition of model makes more sense to me, but only in those cases where there is no measurement or feedback.