So.... leaving aside that this specific game does have one actual loli and three actual shotas with looks and dialog backing it up in every way that matters... I will note that so called "Oppai Lolis" are a thing. Lolis are defined by two factors. Their actual age and their actual looks. Some fall under both, some only one. Oppai Lolis are usually girls with an "adult-like" (by hentai standards), busty figure, but which are explicitly underage. Some are around middle-school age, but high-school age technically counts too. Yes, this does mean that, by the most strict standards, Nako and Azusa both count as "oppai-loli". Though usually, high-school girls have their own "JK" category that's treated differently, at least in Japan, when compared to the more typical loli.
It's been ages since I played Luviria (browsing the H-scenes obviously doesn't count), so I don't remember the context for the witch, but it's quite possible that not all of it was properly translated by Kagura to specifically avoid issues with the Western Audience. (I believe they did something similar in one of the Acerola games where they set up shotas as "gnomes", even though not all the dialog reflected this and you could tell what was really happening there).
That dumb "All characters are 18" disclaimer on Kagura games isn't there because it's true. It's there because Western laws are retarded in regards to the age of the pixels on our screens, and are made by the same kinds of people that believe that violent games make you violent IRL and that D&D players are satanists, along with other such moments of being unable to distinguish pure fiction from reality.
I'm well aware of 'Oppai loli', that's something I considered mentioning somewhere during that rant, but I got sidetracked. I'm not complaining about whether there are loli or shota, I'm complaining about them calling Lifria a loli.
("Complaining" is a bit inaccurate, more like "it bothers me" because of the juxaposition of refering to her as a loli vs her looks, her way of acting and no proper context to back it up - her background is lacking in general for what it's worth)
Also, while there are exceptions most Oppai Lolis still "look like" lolis apart from having breasts large enough to be noteworthy (or in most places, large enough to get a 'Big Breasts' tag) - possibly unrealistically large for her age, but that's not required.
Most cases of someone not looking like an loli but still qualifying for a (oppai) loli tag by most places I know of tend to require heavy story reinforcement of her role as a loli, and even then is unlikely if she looks like a full grown adult.
This is mainly for two reasons imo, first because of the student/JK/etc portion you mentioned, which tends to largely handle "cases" of mid/late teenagers instead of any loli tags - even if they are below the age of 18. I think this is also influenced by the fact that while it is illegal to produce porn featuring anyone under the age of 18 (almost?) everywhere, there are many places where it is legal to have sex with someone under the age of 18 - actual ages vary, but 15 seems like the most common among the exceptions.
The other reason is that while the "official" definition of 'Lolicon' refers to a person who is specifically (sexually) attracted to young girls, the hentai (art in general) definition is largely accepted to be "attraction towards girls that
look underage", largely because trying to accomplish any remotely reasonable "rulings" or concrete grounds to define it would be a nightmare otherwise for most forms of art. If those places accepted the proper defitinion instead anyone that wants to confirm tags for anything that doesn't look underage would have to literally sit down and read through the plot to confirm it. Put that on a large enough scale and the workload becomes enormous and most places tend to have enough problems with tag moderation as is.
TL;DR - lolicon in any "not real life" porn is defined as "attraction towards girls that look underage" for the purpose of being realistically taggable/possible to moderate.
As for it being a translation error, no. They are actually refering to her as a loli in the original script - I haven't read it, but I have a decent understanding of spoken Japanese, and even if you didn't you'd still be able to recognize the "Loli" mentions. As you mentioned a lot of localization companies will remove/change very direct mentions of someone's age - although to what degree differs widely. In some cases they just use "sort-of-correct-yet-not" synonyms that doesn't
technically say exactly that they're underage, in some they use less known terms that still does (loli being the obvious example) and in some they just outright change the script completely and change any references to someone being underage to them being adults.
(The last one can be downright hilarious in the few cases where the girl looks young enough to be safely assumed as prepubescent, because it just feels too unbelievable to read the script like that)
And yes, the whole "All characters depicted/(other variations) are over 18 years old" is just silly, since the only reason it's required is for similar reasons as to why there's been so much controversy about loli content as a whole.. which in turn is largely because a majority of people (seem to) think that being a pedophile automatically makes you a sexual predator, which in turn is likely because of the subject of pedophilia in general is (generally) either instantly cut off in conversation and almost never properly discussed. You need to be able to have a discussion about any problem - including taboo/illegal stuff - to be able to find good solutions/come to fair decisions.
Anyway, combine those problems with the general lack of people being unable to seperate fiction from reality and you essentially have the reason as for why any fiction in the west is "required" (not technically afaik) to mention that all characters are over 18, since otherwise they could end up with a lawsuit - even if their work only depicted elderly people (extreme example).
Sorry for getting so lengthy about it, but I despise having discussions in text without (almost) full context for anything I say - at least anything that I don't forget to mention (not mentioning oppai loli in my last post, for example).
I had NO idea that Lifria was a loli. I must have missed the dialogue talking about her being one. If I had to choose anyone from the cast who even remotely acted loli-like, it was the priestess girl, but even then her bust was massive.
It does seem to be a big staple of Daijyobi's style though. In Maou Harem, two of the girls are described as lolis by the main character during sex, and they very much don't look the part.
The dark elf girl is given the loli title due to her shortness... and that's about it. She's a shortstack, basically, but that's the only thing about her that seems to give her the title. Otherwise, she has a legitimate job as an adventurer, is powerful as a mage, and her physique screams the opposite. She has a cutesy personality and she's ditzy, but she's competent as well. She's hard to get pregnant due to dark elves in this game having a low fertility rate, but that's different.
The priestess girl is given the loli title because of her insinuated age. I believe it's stated that she isn't able to have children physically, despite her figure. She has a very high-pitched voice, but she works as a priestess at a church and is not what you'd usually categorize as a loli.
Also, can I just say that it REALLY bothers me that Kagura Games left out the "Harem" part in their title translation for this game? Even though it has the katakana for it on the dlsite page? It's the largest portion of the title in Japanese but it's non-existent in the Steam version that is TBA on their page.
Right? You would never even imagine to think of Lifria as a loli unless someone insisted on it, and even then it's hard to believe. Compared to her, I'd be far more willing to accept both of the two girls from MaouHarem you mentioned as lolis. The Dark Elf less so, but even she has more "immature" visual features (I'd say Lifria is more immature as a person).
As for the naming, I tend to be largely fine with taking creative freedom to make better sounding titles for localization, but not including the "Harem" portion of the title just runs you the risk of missing people of the target audience.. not to mention that while the English title is
technically relevant to the game, it doesn't give you
any idea as to what the game is about - other than hinting that it's focused around a demon king and is likely more comedic/lighthearted in nature. It'd be a shame if the game doesn't sell enough (partially) because of their choice for the title.