This is the thinking that left many people confused back in the Victorian era. Because Sir Arthur Conan Doyle's name was attached to the stories, they just assumed that it was all made up. But Dr. Watson wrote the stories and Conan Doyle was the literary agent. That his name would be so prominently attached was obviously a clerical error at the Strand, but one which Sherlock Holmes perpetuated so that he might be left alone to concentrate on his work.
Earlier, Dr. Simeon also suggested to Lady Vastra and Jenny Flint that Conan Doyle based many of the adventures of Holmes and Watson on "the Veiled Detective" and her "fatuous companion". Again, that's a mistaken belief on the part of Simeon as it was with so many of the period. However, he did make suggestions to Watson to change the details in order to protect innocent (a practice continued with 'Dragnet'). As we saw when Conan Doyle visited Toronto in 1895, he planned to suggest that the climax of "The Hound Of The Baskervilles" take place on the moors rather than at the edge of a cliff.
Lady Molly is a resident of Earth Prime-Time as well, so the Baroness didn't create the character but merely chronicled a dozen of her cases. However, it could be that some of those were based on what happened to Vastra and Jenny instead. (It just was easier to claim that the protagonists were both human females working together rather than a lizard woman from the dawn of Time and her human female lover......)