The hound should've moved to blue. As long as it can attack/affect its main focus as effectively as possible (without disadvantage and such) the monster tries to optmize the attack, in this case that means going to blue and applying muddle to two targets rather than just one.
I don't think the player in the video did this wrong tbh. The action of the hounds is not an attack (it doesn't have "attack" in the name) therefore the monster moves as close as it can to its focus (in this case the brute b/c of initiative). Therefore the red X is an legal destination hex and so is the blue X hex: it is the same number of movements away from the hounds starting position and the hound would also end up "as close as possible" to its target. So in this case it would be players choice whether the hound ends up on the red X or the blue .
An ability is considered an attack ability if it has the word "attack" printed on the card.
Rule book 2nd printing, p. 30 wrote:
If a monster has a move but no attack afterward as part of its ability card, it will use its movement to get as close as possible to its focused target (determined as if it had a melee atack), moving along the shortest possible path to enter a hex adjacent to its focused enemy.