Much has been made of this record, but unfortunately, the score is technically valid based on TG's rules.
Problem #1: Dragon's Lair can be configured to restart at the first scene after completing the lair scene. The score does not reset, the player simply continues from the beginning with however many lives remain.
Problem #2: The rules of TG's Hard/5-man track are almost empty of guidance. No rules or dipswitch settings are specified, other than "5-man."
So, if this player were on a machine set to restart after the lair, he may have simply gone through the first loop and continued some distance into the second before losing his fifth life and ending the run. And if he were to have done so, he would not be in violation of the rules established for the track. It's possible that this is exactly what happened. For all we know, allowing for marathon runs may have even been intended when the track was established.
So, the problem seems to be less the record itself, and more the the (lack of) rules.