Oh yeah, I heard about this. It's apparently from an episode where Dedede hired a bunch of horny otaku to make an anime, with the end result involving a fanservicey version of Tiff.
Anime considered appropriate for children in Japan can get really weird sometimes, even compared to other anime.

If you whine about all manga/anime today being moe fanservice, remember that there was enough before to be parodied by a 15 year old anime.