Isn't that hug a reinforcer? If you hug him, you're rewarding him for doing something wrong.*
This is just wrong on so many levels. Life is about more than just behavior; you have to take feelings into account, too. After all the frustration and anger contained in a time out - the screaming, the crying, the anger and sadness - it's important, or at least I think it is, to show that there are no hard feelings. To show that, yes, that was a bad decision which was accordingly dealt with, but you still love and care about the child.
Hug or no hug, that's not what bothered me about what she said. What bothered me was her priorities, or lack thereof. We have to make sure that in our rush to "fix" behavior, we don't discard other aspects of a child's well being as well.
This anecdote is not a reflection on actual behavior analysts, the person involved here is not trained as such.
*There was a lovely [sarcasm] subtext of "you terrible caregiver" here. Even though I'm not his parent, because of this experience my heart goes out to those who are parents. Because WOW I have really felt judged and I know that's the daily reality for so many of you autism parents out there.