Quoting without permission was clearly a mistake, but describing it as a "rather clear privacy agreement" is not particularly apt; Freenode policy on this is written as strong advice rather than "rules" as such, and the channel itself had no clear policy. As it was, it was mostly a social convention violation. I thus have to disagree that an indefinite ban for ignorance of advice or an unwritten policy would be an appropriate or optimum response. What's happened so far- the person being corrected quite sharply here and on the channel, and a clear privacy agreement added to the IRC channel topic for next time- seems like a reasonable remedy.

More specifically, the Freenode policy item in question is entitled "If you're considering publishing channel logs, think it through.", the section on constant public logging by the channel staff says "should" throughout, and the bit at the end about quoting publicly as a user ends with "Avoid the temptation to publish or distribute logs without permission in order to portray someone in a bad light. The reputation you save will most likely be your own." rather than stating that it is actually a violation of anything in particular.

What is fairly solid Freenode policy, though, is that unofficial channels of things have to use the ## format, and # format is reserved for generally official project channels. I don't know if the Less Wrong site admins and #lesswrong admins overlap, but if hypothetically Less Wrong wanted to disaffiliate #lesswrong, it is actually entirely possible for Less Wrong administrators to force #lesswrong to, at the least, migrate to ##lesswrong or a different IRC network.

As a #lesswrong user since I started reading the Sequences originally, though, I don't think this is a good idea. Having a real-time discussion channel is a nice thing for those that benefit from it. The IRC channel, listed on the wiki, was the first place I gravitated towards for discussing LW stuff, preferring it to comments. It is fairly Less Wrong focused; links to and discussions of Less Wrong posts are the key focus, even with a lot of other interesting conversations, evaluations, thoughts, etc, perhaps having more actual conversation time. What you remember as having bled over is unrepresentative, I feel.