Is there a LLL in the area? Your friend needs support.
Did the blood in the baby's diaper come early in his life (like the first few days)? If so, it may have been from his mom's hormones and is totally normal.
If not, did it stop after they stopped the formula? If so, it is probably an allergic reaction to the formula. The hypoallergenic stuff is expensive!! But babies usually do fine on breastmilk.
If not, she should try eliminating dairy from her diet, but it may take some time to see a change.
If her thrush was severe, the blood could be from that. The baby may still have it and be giving it back to her. She could also have had mastitis, or, most probably, her baby isn't latching properly. Many babies need to be taught how to nurse, and giving a bottle will often encourage them to latch badly. Improper latches can be tricky to diagnose, but boy can they hurt. Do her nipples look chafed, cracked, red, blistered? Is it worse on one side?
Make sure the baby's mouth opens wide around the nipple. The lips must be flared out--you can "roll" them out once the baby starts nursing. The baby must take a lot of breast into his mouth so the nipple is far into his mouth. His back should be straight, so his head isn't turned.
If his latch is wrong, she'll need to break the suction with a finger, then take him off and start again. With persistence, he can learn to nurse. Even if his latch is corrected, it may take time for her to feel better (a week or so, in some cases). She can use Lansinoh, but she should avoid it if wool makes her itchy. No soap or other substances should touch the nipples. No abrasive bras or milk pads that might stick to scabs. Massaging a little breastmilk into the nipple and then letting it air-dry can help.
A little blood wil not hurt the baby, but the formula could, if he's allergic, and the hypoallergenic kind can be murder on your pocketbook--insurance generally does not cover it.
It's wonderful that you are so concerned. If you're close by, go help her out with meals and chores so she can focus on her baby.