EricMy friend had props and players go invisible in a lobby while he was playing demoman, so it's not just hitscan.
On another topic, has anyone noticed a change in combat text batching? I'm using hud_combattext_batching_window 2 but the actual window seems significantly shorter than 2 seconds. I tested in tr_newbots and it's not even as long as the Revolver reload, which is 1.16 seconds. Using the default value of 0.2 seems the same as before.
The problem will happen even when you spectate a hitscan class. So your friend was probably playing demo, died, and was watching a scout or something during respawn.