Final answer:
The sentence has correct capitalization for the recipe name, but 'that' would be lowercase unless it is part of the official recipe title.
Step-by-step explanation:
The sentence "I found this recipe called Grandma Betty's Fried Okra in a copy of that cooking magazine" is capitalized correctly. When referring to the name of a recipe, it is treated like the title of a work and therefore important words within it should be capitalized.
However, the capitalization of 'that' would typically depend on its placement in the title. If 'that' is part of the official title as given in the recipe, it should be capitalized as 'That.' Otherwise, it remains lowercase as it is not a proper noun or at the beginning of the sentence.