I'm allergic to wool and just wanted to add my 2 cents--
First of all, yes, bamboo and soy and corn and milk are all great alternatives and work very well. Also, there really are some nice acrylics out there, soft, nice colors and knit up well.
If your friends sticks with it and decides to get into sock knitting, I think the best place for very fine yarns in "alternative" fibers is www.yarnmarket.com
Now, as for the chemical/dye/only wool argument: I have found that animal fibers bother me, period. I know there are some people who can wear wool if it's 100% natural, or anything which is non-sheep, but there are also plenty who can't. So my recommendation is to make a pair of mittens in whatever it is, wear them for a while and see what happens. That way, you haven't invested in a lot of yarn and time before you know what your reaction will be. When I knit for other people whom I know to have a wool allergy or sensitivity, I just stay away from animal fibers for them, totally. It just isn't worth it to work on something with love and care, not to mention effort and $$$ and find that they can't wear it, they don't want to tell you they can't wear it so you keep knitting for them with that yarn, etc. Unless, of course, it's something suitable for framing, and then they'll have a nice cardigan hanging on their wall