Roger - your example is exactly the situation where I consider calling models to be ok in libraries. Especially if models are treated as primarily a data access class that ensures that certain business rules are met. Then the library can take that data and reshape it however it needs (or even have it spit out HTML for you.) Since the library and model are part of a reusable module, and they area in the same module, it all works fine, as far as I'm concerned.
If you were creating a standalone library that was meant to be used outside of a module, then I would agree with Narf and say don't do it.
The biggest problem with the term "Library" in CodeIgniter is that it seems to have been EllisLab's term for any class that was not a controller or model. Depending on the context of those classes, there are different allowed uses, I think.
