I think fan translations deserves a high degree of leniency just because it's a free product (and time-consuming at that).
That said, a Good translation product just means one thing. The translator in charge should translate the work to another language while keeping the as much of the nuances of the original language intact.
People use "liberal translation" as an excuse to cover for their own lack of ability to translate the language.
There should be a difference between translating 今日はお休みです (kyou wa oyasumi desu) and 本日は休ませていただきます (honjitsu wa yasumasete itadakimasu)。
Note: to English speakers here who read this post, the 2 sentences carries a very different nuance while having the same core meaning "today, (subject matter (say, a store)) is closed".
Now onto dialogues. Dialogues shows characterization.
When a character says "x-さんも百も承知だーーー名前一つでお前に勝てりゃ世話はない" (x-San mo hyaku mo syouchi da---namae hitotsu de omae ni katerya sewa wa nai), when a fan translator translates it into "X-san knew all too well... that if I could just beat you by virtue of my name alone I'd not need his help "
That is changing the nuance. Which is fine, because fan translations is a free work.
However when fan translators starts using the excuse that "literal translation is bad, liberal translation is the way to go" that's just an excuse. No it's not. Translation is bad when the translators changes the nuance the sentences carry.
Another example is when swear words being put into dialogues when the character themselves didn't explicitly uses swear words in Japanese. When a translator do that, that is them having fun with fantranslating, which is all fine and good. But shitting on "literal" translation is a hypocrisy.
To English speakers that read this post, a more accurate translation for the line above would be something like "x-san knew perfectly well that having just a name wouldn't help me beat you".
Now if the "literal" 1:1 translation of "..that having just a name.." is translated into ..that having a measly name.., that is still a good (literal), even better translation because it's still retain the original nuance. Adding context and bridging sentences is fine and it's necessary, but changing the meaning due to lack of ability is not "liberal", it's just wrong.
A good (paid) translation should "ideally" retain and preserves the original nuances and meaning as much as possible.