From the video it seems as though the script writer (who doesn't speak any Japanese) wrote the script entirely using what he thinks the characters are saying and what he would 'want' them to say. The Wikipedia page for The Water Margin [0] adds that he also used brief plot synopses.

Still pretty baffling though. Does anyone happen to know how close they ended up getting to the original story/dialog?

Was it common to optimize for 'lip movement accuracy' over translation accuracy for dubs?

[0] https://en.wikipedia.org/wiki/The_Water_Margin_(1973_TV_seri...