Well I don't know the technical details of how it all works, but I can see that.
Still though, the OBJ file does support vertex groups. Obviously it's not just LW making it up when some models import with those "overlapping" groups while others don't. If they didn't exist in the OBJ to begin with, then LW would simply make all poly groups into corresponding vertex groups and there would be no overlapping.

So whatever they at E Frontier used to model must have been exporting their vertex groups along with it.

If your exported model doesn't contain vertex groups, then LW is making all the poly groups into corresponding vertex groups on import, for whatever reason. Fine with me, it's damn convenient. ;-)