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It all depends on what level it's done on. If it's got things like LoadModel(); DrawModel(); etc. then I wouldn't see any problems with that, but if it's instead some kind of "immediate mode wrapper" (a feature that should be avoided at all costs), which basically enables you to plot 3D coordinates one by one, it's definitely done wrong. Of course you could code a model drawing function in LUA on top of immediate mode wrapper, but that would be as wrong as it can get.

NOTE: I have absolutely no idea how it's done, just pointing out what I'd consider good and bad solutions.

Of course sometimes you DO need to "plot 3D coordinates one by one", and of course there are better ways to do that than immediate mode.

Also worth pointing out that many moddable games (f.ex. Legend of Grimrock) use LUA for much of the game logic. Of course Hollywood isn't a "moddable game" but something lower level, just pointing out that LUA is quite widely used in 3D game industry.