I'm not a romance writer, and I can't say I've ever read a HQ novel, but they're probably the only romance line I'd know on name alone. They're mainstream, so this really bugs me.
What bugs me more is the idea that this kind of scheme might branch out through other big publishers (clearing slush through vanity pubs.) Sure, there are people who will never get a book published through regular channels - and for good reason - most of them are either unwilling or unable to bring their novels up to par. I see something like this as more damaging than a place like PA.
If vanity divisions become the norm, an author who subs to say 5 houses could get vanity "offers" from all 5 if that becomes the standard practice for slush rejections. 5 offers of almost identical nature, and all telling the author that they might have a future in the big leagues if they start with a vanity line it creates an illusion of quality that doesn't exist. (One offer is a fluke, but for all to offer means talent!!!)
And things like this could rob someone who has an "almost there" MS of a real shot a commercial publication. Instead of getting a solid rejection and going back to re-examine the MS for problems, or reworking it to fit a few suggestions, there's an "easy" route.
Blech.