Quite simply put, yes, it would be wrong. You can see the problem when you look at the actual translation:
"The wildest imaginings that dark rumour had ever suggested to him fell altogether short of the real dread of that place."
"Os mais estranhos pensamentos que os rumores haviam-lhe sugerido ficaram completamente aquém do real terror daquele local".
The word "that" functions as a relative pronoun, and stands by itself as a sort of connector between "wildest imaginings" and "dark rumor". There is no room for "of" in between. A simpler but similarly structured
and therefore equally incorrect sentence would be:
"The shirt of
that he gave me was very expensive." (Wrong)
The very same logic applies to your example.