I am a newbie, but I would think that if their relationship is seperate from yours with him, that she is entitled to privacy. It might not bug you if they talk about his sex life with you, but if it did, that would be okay and you would expect them to respect that. I would think it could take away from the intimacy and even the security of her experiences with him.
As long as they are being safe and not crossing any of the set boundaries ya'll might have, I say they should have privacy. She obviously feels uncomfortable and needs to know that her feelings matter. I would probably feel kinda weird about it, too.