She deffo doesn't look healthy there imo, her bf % is too low. Women should never have a bf % that low
Different competitions have different requirements and standards for the "ideal." I personally did not at all like what she had done with her body.
After reading the story about your friend, and watching the video, I just want to mention a few points...
The women in that video, for the most part, had solid muscle tone, the kind that cannot be developed in a few months, and certainly not by using a crash diet. Their bodies, for the most part, looked to be the result of regular and possibly extreme athletic activity. They had extremely low BMI percentages, but very few of them looked unhealthy, underweight, or malnourished. Most of the women in that video looked to be in peak physical condition - for long duration cardio based athletics like triathalon or marathon running. Note, I say most. Some of the contestants were seriously bordering on healthy low amounts of muscle mass to go with their unhealthy low BMI percentages, and it is likely that they focused much more on dieting than exercise to achieve their respective weights - which is not the point to the competition.
If your friend lost 40 pounds in 3 months, especially 40 pounds that close to her minimum weight which likely contained a lot of muscle mass, she very likely used some manner of crash diet that was extremely unhealthy, advised against, and known to be a bad idea by pretty much everyone having anything to do with fitness. This is further supported by the weight she gained back, which is exactly what happens with crash diets.
I am fairly certain, the competition is designed on the assumption that the contestants used healthy methods to achieve their physical states. I am even more certain that if your friend used healthy methods to achieve her physical state, she'd still be very close to the same size, barring water weight. It normally takes
years of hard work for an athlete to reach those types of muscle and BMI proportions - and they generally have to have a genetic and/or metabolic predisposition to such a low BMI - which is why the competition exists. It is a very difficult thing to achieve for the rare people who can achieve it.
For all intents, your friend cheated. Unfortunately, the person she cheated most was herself.