I played the scenario yesterday. Initially I had the same conclusion that there must be something wrong with the Reds setup instruction. But I soldiered ahead and played it out (solo) with the Reds in a forward defense near the map edge but not right on it, to make it workable. What happened was interesting. As the KMT came on board (half in the advance phase) there were immediate numbers of broken KMT troops who had no place to route, but since they were next to Reds, they became prisoners instead of being eliminated. Eight prisoner counters were created which tied up the Reds as guards. Now, it is possible to abandon a prisoner (which the guards did so they could keep fighting), but the Prisoners then become Unarmed which are considered Good Order and thus count for exiting and scenario VC's. So overall it was sort of an interesting because of the large number of prisoners wandering around, though I doubt it was by design, and still think there is an errata problem.