In Europe and Japan, Michael performed mainly in large stadiums. But most or all of his USA concerts in 1988-89 were in arenas. I think the Bad Tour was a smaller tour than the Victory Tour as that was mainly a stadium tour in the USA. But the Bad concerts in the USA are more acclaimed than the Victory despite the smaller venues.
Your right that Birchey was trying to match the relevant audio. Despite the photos and video not being Smooth Criminal from New York 1988, the video footage is great.
I'd love too see full footage of Wanna Be Startin Somethin and Smooth Criminal from New York 1988.
I haven't watched the Home Movies for quite a few years (I need to transfer it to DVD, can't be bothered to watch things on video anymore). But if Michael is talking about not liking the costumes and set from the first leg of the Bad Tour, I presume he means the Japan and Australia legs of the Bad Tour in 1987. I always thought of the first leg of the Bad Tour in 1987 as nothing more than a dress rehearsal for Michael, as it was really the same set list as the Victory Tour with only Thriller, I Just Can't Stop Loving You and Bad added to the set list. A lot of stars used to start their tours in Japan, before they were perfect because Japanese critics were seen as not as critical.