Update: I talked to my friend, who has followed up a bit with her friend who has all the clothes. The friend says her daughter is still wearing *all* the clothes.
My friend hasn't pushed the issue, although she would like at least some of them back--especially since some were ones she particularly loved seeing on her older daughter and really wants to see her younger one wear, too.
Personally, I think if the giver is asking for them back, even if your kid is still capable of wearing them, you should at least return a few items as a show of good faith. But maybe that's just me? (In my own hand-me-down train, things had gone from my older niece to my daughter to my younger niece, who is 6 mos. younger than my daughter. My sister gave me about 1/3 of the items in a certain size and kept the rest in a bin for her daughter. She then couldn't find the bin she kept (with the majority of the clothes in it) and I gave her everything back in that size and moved my daughter up a size (even though she was a little small for it) because those clothes were my sister's in the first place. I also passed along items that were mine to start with, because if she couldn't find the rest of that size, the 1/3rd portion she gave me wouldn't really be enough for her daughter. Now, my niece has outgrown my daughter, so the hand-me-down train skips our house entirely, but is now the last stop--getting baby things back for my own #2 to be born in April.)