Stories vary depending on the source. At DHARMA beat you'll see this:
Quite a bit more detail is provided at The Last Bohemians blog (click here).
According to the Character Key To The Duluoz Legend compiled by Dave Moore, Vidal did have an "infamous one-night liaison with Kerouac in the Chelsea Hotel, New York, summer 1953." This gibes with The Last Bohemians description. Also, according to Moore, Vidal was portrayed in Jack's The Subterraneans as Arial Lavalina. Other on-line character keys confirm this.
Jack's character in The Subterraneans, Leo Percepied, did have some sort of horror-inducing relations (anal intercourse, fellatio, who knows - we're not getting Clintonesque here) with Lavalina in a hotel suite, and since Jack's novels were undeniably autobiographical (how much is open to debate), this liaison in the book lends credence to the possibility of a real-life liaison. Here's the segment from The Subterraneans:
. . . because, you know, around here everything connects back to Kerouac. Everything.
*Gratuitous modern TV cultural reference