Indeed. The second approach is the traditional one in fan-translating, and originated as a reaction to the gross excesses of rewriting that happened in manga released by American publishers. SAD was at first one of the TL-teams who worked that way, sticking to the original texts almost word by word, but recently they have started taking some liberties to make the dialogues flow better and the reading experience more enjoyable. I see it as a proof of maturity... and the results so far (WGO, I Wouldn't Mind Being Loved) have certainly been impressive. In the end, imho, it all boils down to this: domestication/localisation in translation is something better left to the loving fans who really care about the original; they are the ones who can and will do it right. (Again, this is imho, and ymmv, m'kay?)
Haha, I remember when American publishers first started releasing ecchi manga in English.
In those olden times, they didn't translate the dialogue: they did a complete rewriting from scratch. Like, they took the pages with the Japanese text cleaned off, they got someone to provide them with an outline of the plot, and then they wrote something completely new, trying to make it as quirky and zany as possible.
I remember one issue (in the ST series, if I'm not mistaken) where a guy went to a shrine and prayed that his love life would become less complicated.
You see, he was banging a lot of nymphos, but he was tired of it: he wanted to have a normal romance with just one girl!
So, after praying, he got an omikuji at the fortune lottery, to find if his wish would come true. When he checked the strip of paper, there was (of course) the kanji for Big Bad Luck... meaning that his wish would not come true!
But, in the American version, the strip of paper had this written on it in big characters:
---- DEFEAT ---- DISASTER ----
--------DESPAIR----DOOM--------
--------------------- Sorry, kid! -------------------
This is what I call going too far with the localisation: sacrificing everything specific to the original for the sake of a joke. This is what fan translators rose up against when scanlation became a boom. But SAD's work has nothing to do with this sort of exaggeration; it's unfair to blast their work when it's a completely different can of cookies.