Digging around I found some forum posts confirming the bake theory

Bots largely depend on viewer compositing, this means they
send the
individual clothing layers, but no baked ones, and the viewing
user's viewer composites them into a viewable avatar.

Starting from 1.23, LL viewer no longer send, or expect,
compositing
layers. Avatars no longer carry texture information about their
individual clothing items. This is to combat theft, avatars now
carry only the 3 baked textures. Therefore, Copybot can no
longer
rip clothing from an avatar it sees.

Because of this, the "Cloud" stage is perceived to be longer
on 1.23
users, as they don't render until the bakes have been pushed
to the
server and then downloaded by the other clients. An avatar
counts as
unloaded if it's visual params are the default ones OR it
has no
baked textures. Previously, it would count as unloaded only
if it
had no textures at all, or all default visual params.

Since bots don't bake, they will never render for users of
the 1.23,
since it neither creates not expects compositing layers.

The following are the minimum textures that need to be baked for an
avatar to be considered "complete"

TEX_HEAD_BAKED
TEX_UPPER_BAKED
TEX_LOWER_BAKED
TEX_EYES_BAKED
TEX_HAIR_BAKED*