The correlation between the guardian and the city is not at all convincing, nor is Lugia's inability to deal with fire. And worse, after the disaster, the Pokémon simply left town with the mention that it will only return when summoned by someone with a pure heart. However, in the narrative, no reprehensible behavior of humans remains explicit for the Pokémon to assume such attitude.
You can read this play as not what actually happened but the official version, what they told in Ecruteak City.In conclusion, this short contradicts Crystal rather than supplementing it. We don't know what Lugia was doing at the time (just that it left the tower when all was said and done), but the only way to explain the fire raging for so long is that Lugia was either unavailable to help or hadn't mastered Water-type moves yet.