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.
There were other episodes planned that would have tied it into the original show. Besides TSaS there was a two parter planned for the first season involving Spock and the Guardian of Forever. The season finale The Neutral Zone
was to feature Harry Mudd but was rewritten after Roger Carmel died. Apparently there was even a Khan episode planned where Picard and crew battle him in a holodeck simulation.
Odd as it may seem I'm more disappointed at losing the Mudd episode than I am Spock and Khan.