You are correct. If a Pokémon is traded from a gen 2 game to a gen 1 game it will display that the Pokémon was met in Kanto. This is due to gens 1 and 2 not having data for what game the Pokémon originated in. Lastly, the Pokémon will still be 100% legal since this can be done without glitches or hacking on native software.