I want to drive from Tijuana to Cabo San Lucas but I've heard of people being pulled over by corrupt cops and being hassled by people on the peninsula. I speak fluent Spanish and I'm pretty street smart. Should I be worried?
The mordida (nibble) is unfortunately deeply ingrained in Mexico, although mostly a feature of local police and not the federal police or the military, and there are various anti-corruption initiatives at work in the larger cities.
Generally, the interaction involves being pulled over for a traffic offense like speeding or not wearing a seat belt. The driver is warned of some exaggerated penalty for some exaggerated offense, then suggested to get the fine reduced for a consideration of a few hundred pesos. There are very few stories, however, of more serious harassment. A dirty cop is out for cash, not blood, so a play for time may encourage him to move on to another target.
There are plain vanilla ticket traps all over, as there are in Canada and the U.S., and legitimate checkpoints set up by the military and federal police, so it's good to be aware of local laws (e.g. tinted windows are illegal in Tijuana unless you have proof of manufacturer installation) and to follow the standard tips for dealing with law enforcement in any country:
On federal highways and in the larger cities (Tijuana, Ensenada, etc.) you will have written traffic tickets; elsewhere, however, the officer will take your license and escort you to the police station. Any solicitation for a bribe will take place before you get to the police station, of course, so if you can play for time, the dirty cop will get impatient and let you go. Knowing Spanish helps mainly in that the dirty cop would fear that you know of recourse to the Sindicata or other authority.
If you do go to the station, you will meet the juez calificador (a kind of municipal judge) who will review the charge. If you feel the charge is unfair, you can appeal to the judge. There is a discount on the ticket if you pay early.
If you have been solicited for a bribe, by all means report it to the authorities. The Sindicata (think: Internal Affairs), the local mayor, the governor, and the consul would be a good start.
Baja Insider magazine has an interesting 2010 article with some tips on avoiding or minimizing your mordida exposure: http://www.bajainsider.com/driving-baja/policecorruptionbaja.html
Above all, remember that the greatest risks of driving in Baja California come not from drug cartels, banditos, or corrupt police, but from the road itself. The roads are often narrow, isolated, in disrepair or under construction, or being crossed by cattle or horses, and likely some combination of the above. It is best to stick to the toll roads (which are better maintained and controlled), to drive during daylight hours only, to keep your fuel topped off, and to drive slowly.
These are some tips based on my own experience driving extensively in Mexico (although not so much specifically along the Baja peninsula)
*The only time I argued with an officer was when I was threatened with being arrested for having a torn vehicle registration (See #2 below). I knew I was in the right, and I read the rules directly to him, which said unregistered vehicles were subject to a fine and impounding, but not jail.
Following is a summary of my run-ins with the police (and in one case, psuedo-police) in Mexico.
I hitchhiked from northern Baja to La Paz. I had no problems.
Outside of Tijuana and the resorts in Cabo, Baja is mostly desolate and remote, and I would not expect any problems with the police. Instead, expect the desolate beauty of the desert, and hospitality and respect from the locals (assuming you show the same).
In Tijuana itself, I'd guess that anything could happen.
Your ability to speak Spanish fluently will help greatly should you get into trouble.