I heard they were supposed to act if it didn't exist. Sure they could copy it but they were never to mention the characters. It was only later in the series when TNG was a success and certain people had left that they could relax and acknowledge it reluctantly.
The prohibition on connections to TOS did not begin in the first season of TNG. The first season contains numerous references.
For example, McCoy himself appears in the pilot episode. And in The Naked Now
, they specifically reference the original TOS Enterprise and Captain Kirk by name.
I believe it was Rick Berman who had the issue with referencing TOS once he became head honcho around seasons two and three. Ron Moore says it was Berman he struggled with to get to mention Spock in Sarek
. But then Berman loosened up on that later on, allowing references in during later seasons, not to mention appearances by Spock and Scotty.