1) The company was on the fence about wanting you anyway, and negotiating takes you from the "maybe kinda sorta want to work with" to the "don't want to work with" pile.
2) The company is looking for people who don't question authority and don't stick up for their own interests.
Both of these are red flags. It's not really a matter of ethics - they're completely within their rights to withdraw an offer for any reason - but it's a matter of "Would you really want to work there anyway?" For both corporations and individuals, it usually leads to a smoother life if you only surround yourself with people who really value you.
Know how to close. Your friend allowed this to happen. There is nothing unethical or abnormal about the circumstances described.
There is no need to post anything beyond your question. Perhaps people will learn from the experience.
Apparently your friend didn't think it was a great offer, so there is no reason to be sad, or otherwise.
Negotiating typically doesn't need to be cloak and dagger and being earnest builds trust and rapport. You can take a position and continue to negotiate. Even more so if you are asking them to match or get closer to your current comp. She left it open for retraction for hours.
If this is ethical this hinges on what they asked for.
That's how negotiations work guy.