I believe she does. She went out with my brother behind my back. I asked our mutual friend if I went out with her brother (romantically or not) would she be upset if I didn't tell her? She said yes. I asked my co workers how they'd feel if they're friend was macking on their sibling if they'd have a problem with that and they all said yes. I know, I'm not crazy in that respect.
And no you are wrong. I would still have a problem if they dated and she wasn't crazy. She's my friend and he's my brother. The minute they f**k is the minute she is no longer my friend. Yes, I would still be polite, nice and all that but "friend" is out of the question. She would now be a potential sister in law. And I personally believe that friend does not go hand in hand with sister in law.
And if you missed it I already talked to them both; brother included.