How to set up a windows Patch baseline based on a policy

I have no idea what this means. You need to link to documentation or provide a lot more info on what you mean by this.

Baselines should generally be dynamically targeted to an automatic group so that as new systems come online, they join that automatic group and then get the baseline.

If you deploy a baseline as a “policy action” this just means that the baseline will apply indefinitely, so that if any of its components that are set to make the baseline applicable become applicable again, any applicable components of the baseline will apply again. Doing this requires careful management of the components, their relevance, success criteria, and if they are set to make the baseline relevant again.

If everything is written well, then anything you want to always be the case should be deployed as a “policy action” that is dynamically targeted. If the relevance isn’t written well, or the actionscript has issues, then doing this could cause computers to run the action over and over and over, which is bad.

Anything is technically a “policy action” if the “reapply this action” box is checked.

If you are using BigFix for fully automated configuration management, then this is how most things should be deployed… assuming the content is well crafted.