Translation:There are a lot of people in Tokyo.
Your version should be the correct one! I don't think the original question where only は after Tokyo is correct (in a normal grammatic setting). Tokyo is a place so it should add a に to indicate the place of existance.
Well the original question can still be correct where it falls in this grammatic structure - "Topic" は "characteristic" e.g.
- 私 は 日本語が好きです
- 彼 は 日本語が話せます
Therefore 東京 は 人がたくさんいます
But I would still think Tokyo is obviously a place and should add a に to make it grammatically correct. If it is 東京は人が多いです then I would say OK.
I would have wanted to put (sorry no jp keyboard)- Tokyo hito WA takusan imasu. - GA is not needed at all. The point of the sentence is the "lot of people" which always follows WA. I.e. "Tokyo people" - "A lot of them" emphasis on "lots of people" use WA. Emphasis on "Tokyo people", use GA.
"hito" is what is known as the kun'yomi reading. With some exceptions, kanji have two readings, the reading when used by itself, the kun'yomi, and the reading when it's part of a compound word, the on'yomi. So in this case 人 is being used by itself so it's read as ひと, if it were part of a compound word it's usually read as じん (with some exceptions). Examples like 人工 (じんこう), meaning artificial or man-made, or something like 要人 (ようじん) meaning important person.