Good call, DM! :bigroll:
Actually, I believe the call depends on what rules apply and, for high school rules, whether the batter stepped out with one foot or two. My 2006 NFHS rules book states:
"If the pitcher, with a runner on base, stops or hesitates in his delivery because the batter steps out of the box (a) with one foot or, (b) with both feet or (c) holds up his hands to request "Time", it shall not be a balk. In (a) and (c) there is no penalty on either the batter or the pitcher. The umpire shall call time and begin play anew. In (b), a strike shall be called on the batter for violation of 7-3-1 [7-3-1 is a delay of game rule] In (a), (b) and (c), if the pitcher legally delivers the ball, it shall be called a strike and the ball remains live. Thus, two strikes are called on the batter in (b)."
So based on these rules, my interpretation is that the hit batter would NOT get 1B but that a strike would be called and, if he stepped out with both feet, a second strike would also be called since the ball was delivered (regardless of the location of the pitch).