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Yes — this is a more nuanced picture of Nietzsche than simply saying “Nietzsche misunderstood Buddhism.” The key is to separate what Nietzsche admired from what he rejected.

DDP — distilled argument

Nietzsche on Buddhism	What it means
He respected Buddhism	He saw it as relatively realistic, practical, and physiological in its treatment of suffering.
He preferred it to Christianity	Buddhism seemed less fanatical, less guilt-driven, and less dependent on supernatural moral claims.
But he still called it nihilistic	He believed Buddhism ultimately aimed at reducing desire, action, struggle, and attachment to existence.
Buddhism = passivity?	Nietzsche interpreted cessation of craving/kamma as a movement toward inaction and resignation.
Nietzsche's alternative	Will to Power, self-overcoming, creativity, affirmation of life, and ultimately the Dionysian “Yes” to existence.
“European Buddhism”	Nietzsche feared Europeans, after the Death of God, might respond to the collapse of Christian values by simply becoming passive and comfortable rather than creating new values.
Pyrrho comparison	Both Buddhism and Pyrrhonism can be interpreted as seeking freedom from disturbance through detachment/suspension—but this comparison is philosophically controversial.
Buddhism as a foil	Nietzsche uses Buddhism partly to define what his own philosophy must not become: resignation, passive nihilism, and withdrawal from life.

The really important distinction

The video is essentially saying:

Nietzsche's interpretation of Buddhism ≠ Buddhism itself.

Nietzsche asks:

“Does this philosophy affirm life, or does it seek liberation from the struggle of life?”

From Nietzsche's perspective, Buddhism fails this test because it seeks the cessation of craving and therefore appears anti-struggle and anti-affirmation.

But a Buddhist might respond:

“You have confused eliminating craving with eliminating life.”

That is the exact philosophical fault line.

Nietzsche vs Buddhism in one diagram

Buddhism

Suffering
↓
Craving / clinging / ignorance
↓
Understand their causes
↓
Remove their causes
↓
Nirvāṇa / liberation

Nietzsche

Suffering
↓
Don't merely eliminate the conditions of struggle
↓
Transform / overcome yourself
↓
Create values
↓
Affirm existence
↓
Life-affirmation / Dionysian Yes

And this explains the “European Buddhism” idea

This is probably the most important point in the video.

Nietzsche wasn't merely worried about Asian Buddhism spreading to Europe. He was worried about a European psychological condition:

God is dead → old values collapse → people discover life is difficult and meaningless → instead of creating new values, they seek comfort, safety, reduced desire, reduced ambition, reduced suffering.

That person becomes something like Nietzsche's “Last Man.”

So Nietzsche's fear is:

Christian nihilism disappears, but nihilism itself remains.

The Christian says: “This world is bad; salvation is elsewhere.”

The passive nihilist says: “There is no higher meaning, so let's just minimize suffering and make life comfortable.”

Nietzsche's answer is radically different:

Create. Struggle. Overcome. Become. Say Yes to life.

One correction worth making

The statement “Buddhism teaches cessation of action” is too crude.

As you noted in the previous passage, Buddhism distinguishes different kinds of action and intention. An awakened person doesn't literally become an inert object who performs no actions.

Likewise, nirvāṇa ≠ simply “nothingness.”

This is precisely why Nietzsche's characterization can be criticized: he takes an important Buddhist idea—cessation—and interprets it through his own philosophical category of life-denial.

So the fairest conclusion is:

Nietzsche understood enough of Buddhism to recognize its practical orientation toward suffering, but he interpreted its ultimate goal through his own life-affirmation/nihilism framework.

And that's why Russell's criticism and Nietzsche's criticism can both be interesting: Russell asks whether Nietzsche understood Buddhism correctly, while Nietzsche asks whether a philosophy that seeks liberation from craving adequately affirms life.

Those are actually two different questions.