> He recognized how she transcended genre and belongs alongside (or perhaps, above) writers of highbrow literary fiction.

In the 70s and 80s, Le Guin and other SFF authors were very aware of the literary divide that often regarded most science fiction and fantasy as little better than pulp fiction. Gene Wolfe's essays and speeches in Castle of Days touch on this several times.

What changed was the arrival of a new generation of literary critics, researchers, and readers who knew greatness in some of the SFF works of the era.