This is pretty accurate.
In the old days, a fan translation can be considered bad if either of this happens:
1) they insert unfunny current year pop culture in the script which quickly becomes outdated when gamers play it years later. Not a fan translation but Working Designs was notorious for this.
2) they immaturely insert swear/curse words or exaggerate the script for comedic effect. This happened to Tales of Phantasia as you pointed out where the main character or the main character's friend points out that Arche the witch girl, "fucks like a tiger." What he actually said was far more tame but "fuck" in a JRPG is "funny" so let's go with it.
There wasn't actually too much politics related "localizing for the modern audience" censorship to protect people's feelings because:
1) Politics wasn't as gay back then
2) Troons were hidden so they couldn't promote their degeneracy
3) Women hated video games and the men who played them
I don't know if he's still alive but I remember a guy called SkyRender who went against the crowd by retranslating Final Fantasy VI as accurately and literally as possible and faced heat for it.