The Orphanage terms of use require the original authors to be credited, and RyokoTK didn't provide that credit, because he didn't know they came from the Orphanage. Simon had either led Ryoko to believe the contributions were Simon's own work, or failed to mention that they were the work of others. The specifics of what Simon provided are listed in the
link Patrick posted. Since their work wasn't credited, the authors were rightfully upset, and Ryoko even more upset that he'd (unwittingly) violated their terms of use.
Later in that Story forum thread, RyokoTK adds (in the "By the way" post) that Portal of Sigma uses textures by James Hastings-Trew without permission. I wasn't around for any of this, and don't know whether any Portal of Sigma violations were resolved; I only know what's been posted on the forums.
What Ryoko and Patrick are saying is this: Portal of Sigma is tainted. If you're looking to redistribute or borrow from it, chances are you'll step on someone's toes regardless of what Simon says.