Yeah, it does bake properly. Normal maps doesn't store height data, but directional data. That means you can "float" geometry off the surface, as long as the rim of the float is completely parallel to the underlying surface. Hope that makes sense..
DAAAAAYUM GannoN!!! Daphz- that character is pretty rockin but I really wish the hard surface stuff was sub`d-e-ed. would make for a nice contrast in shapes- I think that's one of the major benefits of using separate methods of modeling is you end up with a nice diversity of surface types.