First, Lainey, bless you for holding me up with Susan Wiggs.
Now, to address some of this.
First of all, Avon does NOT publish "category" romance. At this moment, pretty much the only place that does is H/S. Avon publishes genre romance, but so does Kensington, Ballentine, Berkley, St. Martins, etc. Harlequin also publishes single title books. Mira books are NOT category romance.
Do I think category romance writers get less respect than single title writers? Yes. (Remember that other thread around here where I said each "group" always think other groups have it better? <G> Yeah, same probably applies here.)
Yes, a lot of H/S books are "mind candy." I don't write mind candy. At least, I try not to. I try to write a book that's different enough that SOMETHING about it sticks with you. But a lot of the lines are intended to be exactly that - a chocolate bar. Or maybe some of them are cotton candy - not much substance at all.
I'll willingly admit that there are some category romances that just make me want light my hair on fire. (Hi,Jersey! <G> Sorry to steal your line, but it's applicable. <G>) When I set the book down and five minutes later I can't remember anything about the book...that doesn't please me as a reader.
Can you make a decent living at writing those "little romances?" You can, but it depends on a LOT of factors, not the least of which is which line you're writing for. Some lines sell way better than others, hence they pay better. Desire and the original Harlequin Romances still sell really, really well. It depends on how many books you can write per year (which also matters in single title land. <G>)
Nora Roberts no longer writes new books for any of the Harlequin lines or imprints. She and Harlequin had a parting of ways a few years ago. (Totally stupid, IMHO, on Harlequin's part. Sorry, HQ, but that's the truth. Like killing the goose that laid the golden egg.)
There have been a FEW 1st person categories, but FEW is the operative word. 3rd is much more standard, and thus a "safer" choice if you're writing with the intent to sell.
If you're going to target a specific line, then you'd better do your homework because they each do have a very specific feel to them. Some of them are closer in tone, but still each is unique - otherwise, why bother having different lines?
Okay, I think I've addressed everything. Any more questions, just fire away.
(And Gil, some of my best, noncliche turn-of-phrases got edited out of my stuff. <G> Wasn't category enough. The problem with that is, if it happens enough, you adjust your writing accordingly, and then the pretty prose is no longer the way you write.

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Susan G.