It's still this way; you can buy anime box sets in the US 
    for an entire series that costs less than a single episode in Japan.

Yes -- this was their main fear. Japanese audiences "reverse importing" discs sold in overseas markets.

Western markets may be "a joke" in terms of sales for exported Japanese-market anime, but it's also essentially free money for the makers of that anime. ADV, Disney, and others wrote some fairly big checks to license series back in the day.

They produce a show for the Japanese market, and if they are lucky they can score some nice checks from overseas distribution for essentially no additional effort on their part.

    They segment the markets by burning English subtitles into the actual video. 

I'm sorry, but this is mistaken. I've been collecting this stuff for decades and was once a reviewer who got quite a few review copies from ADV and others.

Perhaps there have been a few specific examples I'm not aware of but I've never once seen this. Well, except for the VHS era when obviously soft subtitles were not an option.