I think her work with its mediaeval style was perfect for Farmer Giles
and Smith of WM
. The slight feyness of it also perfectly illustrates The Adventures of Tom Bombadil
, so no surprises there that he liked it in the context of the books she illustrated for him - but I don't think she would have ever been right for LotR or The Hobbit. We know Tolkien wanted her to illustrate LotR, but that there wasn't the budget for it. I also find that surprising, Merry. She illustrated the cover of the '70s single edition paperback of LotR and although I love it because I grew up with it it's somehow not 'right', it has a whimsical edge. She also did a few more LotR and Hobbit related commissions for Allen and Unwin including the Middle-earth map.
Personally I could never have seen her as an illustrator for the whole of LotR unless her style completely changed into something darker and edgier - and then she wouldn't be Baynes. What works for the gentler, young-child friendly Chronicles of Narnia would never work for LotR. I'm not sure it would even have been right for The Hobbit
Maybe Tolkien was too charmed by her work and attached to it to see it - after all she hadn't let him down up to that point, producing work that he felt matched his vision.
A set of Bayes LotR drawings would have been very, very interesting to see. Would she have changed to suit the darker tone of the book? Would Tolkien, ultimately, have been happy with them?