Every CRTC/video chip has an "internal framebuffer(s)", the sprites / tilemaps / blitters / polygons stuff is just a layer that is then always converted internally by the video HW. It's only a recent "invention" that you can control/write this framebuffer directly, but it was still there from the dawn of times...
About Seiken Densetsu 3, there's certainly a bug regarding that garbage at the top of the talk bar, surely there's a couple of bug in the current mode 5/6 implementation (see also the vertical stripes in that Tokimeki Memorial screen).
