Er lag total daneben.

English Translation

He was dead wrong.

in wiktionary ‘daneben’ just means ‘next to it’, but does this informally mean ‘wrong’ or ‘off’?

Yes. It’s about hitting “next to” the target, i.e. missing it.
So you can say “daneben” means “missed” or “off”, for example both literally with a throw and figuratively with an assumption or statement.