"there should be Form W-2's ... maybe I was right about that?"

Yes, you are.

"as she obviously has no earned income as a result of choosing this particular tax vehicle ( LLC as an S-Corp )"

One S Corp requirement is Reasonable Wage to those who are doing the work of that business of that S Corp.

"He treated everything as Distributions, apparently, even though the 2 partners each had Draws"

There is no such thing as Draw, or Distribution, or Guaranteed payments. That distribution and these draws, should the IRS realize there is no wage reporting, has the right to recharacterize any takings as Taxable wages, resulting in late fees, penalties, employer taxes and past due reporting, etc.

Your friend needs professional help right away, because she is already not in compliance. And needs a new CPA/accountant, as well.

If you work for an S Corp, you are supposed to be paid as wages. Period. That is earned income from the work you are doing. You might also be a shareholder-partner but you are an employee, too. There also are some rules and limitations on >2% shareholder, >10% shareholder, and other financial management considerations. All of which start from the employment position of this person, as "doing the business" for the corporation, which cannot do its own work.