I am being a bit strict with my definition of Judge arbitration... and a bit judgmental of the AD&D wandering/random monster chart advice.
The chart (the d12+d8 roll type) presented in the book suggested that you fill in common monsters around the middle, and rarer monsters towards either end of the chart - with the added advice that a more potent monster could be treated as rarer so that you can actually fill in the chart.
You mean the advice in the Monster Manual II here, right? Because, before that, a %-based chart was suggested.
Yes, such a wandering monster chart needs to be created with the supposition that certain creatures are in (or are likely to wander into) the area that is being explored. And, yes, the judge is absolutely responsible for choosing what those creatures are.
Knowing that you can encounter things outside your "fight range" is good for the game, I think. But it is wrong to imagine that, simply because something is being rolled for, the area description should not take its "footprint" into account. If there are basilisks wandering around, there should be some indication that basilisks might be wandering around that area. Old and broken statuary, for instance, is going to be encountered far more often than the critters themselves. This is no different than, living in bear country, one encounters bear scat and prints more often than one encounters bears.
I'm not saying that there should be no wandering monsters or monsters encountered seemingly at random during the "travel montage" portion of a game - I'm saying that rolling randomly to determine which monsters are encountered is almost never more enjoyable than deliberately choosing them.
Both have their merits and their drawbacks. Different folks, different strokes.