Mal 2:13-15
Another thing you do: You flood the LORD's altar with tears. You weep and wail because he no longer pays attention to your offerings or accepts them with pleasure from your hands. 14 You ask, "Why?" It is because the LORD is acting as the witness between you and the wife of your youth, because you have broken faith with her, though she is your partner, the wife of your marriage covenant.
15 Has not [the LORD] made them one? In flesh and spirit they are his. And why one? Because he was seeking godly offspring. So guard yourself in your spirit, and do not break faith with the wife of your youth.
NIV

Marriage is the one relationship divinely designed and acceptable for sexual intimacy, and marriage is a lifetime covenant commitment (binding promises and a legal contract), not merely an arrangement.

What the writer of Hebrews taught on this doctrine has not changed, and cannot be changed by human confusion or stubbornness: Heb 13:4 Marriage should be honored by all, and the marriage bed kept pure, for God will judge the adulterer and all the sexually immoral. NIV Sex without the honored and recoginized covenant of marriage is condemned by God and subject to divine judgment.

Unfortunately, situations like the one described by Craig do arise, and I've had the sad experience of being involved in similar scenarios. Sometimes a person (or persons) in a relationship that is not morally acceptable is unwilling to make a change, but desiring baptism or church membership as a result of Bible study or association. This can be a truly heartbreaking set of circumstances. People can offer many reasons, economic, emotional, and otherwise, why they can't or won't change. Many doubts can and do arise about our role in determining who can receive God's gift of grace and forgiveness. (Yet, when I have seen people finally resolve to do what is right, the "reasons" that previously made it seem impossible have always been solvable.) If we truly believe baptism is necessary for spiritual rebirth and citizenship in the kingdom of God, withholding it from one who desires it is very awkward, to say the least. It isn't always clear when someone is ready to be baptized, but we should at least realize that a determination to continue to disobey God from the outset is a good indication that a person is not ready.

The Bible pictures a process of conversion that includes believing the message of Christ, and repenting before baptism occurs. Repentance (turning away from sin, turning toward God) is consistently mentioned as part of the process of conversion for forgiveness of sins in Acts (2:38, 3:19, 5:31, 11:18, 17:20, 20:21, 26:20). For example, the conversion of Cornelius and his Gentile friends and family is summarized this way:

Acts 11:18 When they heard this, they had no further objections and praised God, saying, "So then, God has granted even the Gentiles repentance unto life." NIV

So being saved is a product of repentance. Or again, Paul summarized his preaching of the gospel by saying, "I have declared to both Jews and Greeks that they must turn to God in repentance and have faith in our Lord Jesus." Acts 20:21 NIV

Christians must understand that salvation requires turning to God in repentance, and having faith in Jesus, not one or the other, and certainly not persisting in sinful behavior and insisting on being accepted "as is."

I am persuaded, though sometimes the conviction has been emotionally painful and disappointing in dealing with people we are fond of, that baptizing someone who has said ahead of time they will not change egregiously sinful behavior, such as fornication or adultery, is a violation of God's purposes, and promotes the worst kind of deception (false security) to people unprepared to face God. Baptism must be prededed by repentance. Repentance demands a decision to change sinful behavior and obey God. Otherwise, the faith associated with baptism would not be particularly different than that ascribed to demons, who "believe and tremble" but continue in rebellion (James 2:19)

Undoubtedly some will suppose that since Christians do sin after being "born again of water and the Spirit" and can be forgiven it is unreasonable to expect a change such as separating from a live-in partner or marrying that partner before baptism. Certainly any new believer will continue to learn and grow and struggle with past habits and sinful acts. Believers do err, but that does not in any way negate the requirement that we repent at the beginning of our new relationship with God. And then when baptized believers do sin they need to repent and seek forgiveness. Christians cannot "continue in sin that grace may abound" (Romans 6:1). Again, repentance is insisted on by the scriptures. We must turn away from sin to become a Christian, and we must repent of sins to continue as Christians (2 Corinthians 7:8-10, 1 John 1:8-10). Recognizing sin in ourselves, regretting that sin, and turning away from it and toward God is necessary. There is no salvation apart from repentance.

People in the circumstances described by Craig should be dealt with as Paul commanded Timothy (below), if at all possible, not with false assurances, but with gentle instruction in the hope that they will yet be led to repentance.

2 Tim 2:24-26
4 And the Lord's servant must not quarrel; instead, he must be kind to everyone, able to teach, not resentful. 25 Those who oppose him he must gently instruct, in the hope that God will grant them repentance leading them to a knowledge of the truth, 26 and that they will come to their senses and escape from the trap of the devil, who has taken them captive to do his will. NIV

When we are disappointed by someone's response to the gospel, folks who seem close but unwilling to take some critical step, we share in the expressed desire of God, and must not compromise what he has called for to obviate our own disappointment and thereby fail to present saving truth. God wants people to "come to repentance." This has called for patience on God's part, it calls for patience in persistent teaching as well.

2 Peter 3:9 The Lord is not slow in keeping his promise, as some understand slowness. He is patient with you, not wanting anyone to perish, but everyone to come to repentance . NIV