大雄峰 is Great Hero Peak, and 大雄, the Great Hero, is an epithet of the Buddha; the peak is Baizhang's whole answer. Blyth prints the bare Japanese sound “Daiyu Peak,” collapsing the loaded epithet into an opaque place-name.
The confrontation
The dictionary's band
Attested band verbatim from the dictionary entry 大雄峰
- Great Hero Peak
Entry Explanation (verbatim)
Great Hero Peak is the mountain summit in Baizhang Huaihai's answer ‘sitting alone on Great Hero Peak.’
Blyth knew better
Corroboration: the epithet is attested, the sound carries none of it
The band is a single member, Great Hero Peak, and it is load-bearing: 大雄, the Great Hero, is the standing epithet of the Buddha, the Mahavira. Baizhang's answer names that peak on purpose, so the summit is not an incidental place but the Great Hero's own seat. Blyth's “Daiyu Peak” is the Japanese reading of the three graphs with the meaning stripped out; “Daiyu” tells an English reader nothing of a Great Hero. The peak survives, its point does not.
The literal reading
A monk asks Baizhang for the extraordinary matter, and Baizhang answers with a place: 獨坐大雄峰, sitting alone on Great Hero Peak. The force of the answer is that the place is not incidental. 大雄, the Great Hero, is an epithet of the Buddha, so the peak the master sits on is the Buddha's own summit, and the ordinary act of sitting is the extraordinary matter. The dictionary attests the name in English: Great Hero Peak.
The alteration
Blyth keeps the peak and loses the hero. “Daiyu Peak” is the Japanese sound of 大雄峰 with the sense removed, so the epithet that makes the answer an answer, the Great Hero who is the Buddha, vanishes into a proper noun that means nothing in English. What was a claim, the master sits where the Great Hero sits, becomes a bare place-name, as if Baizhang had simply reported his address. Because the graphs are Chinese and the dictionary attests them in English, the transliteration falls outside the band. The reader is left with a mountain and no idea why it matters.