The military knew. That record didn't need to be sealed. What you friend went through was most likely a diversionary program. Proceedings were stayed, and eventually dismissed, prior to him being formally charged (or convicted, depending on the exact procedure). So there is an arrest record, but not a conviction per se. The military doesn't take issue with arrests.

That said, someone in the military looked over the case and oked your friend. Someone knew. A judge cannot force the army to take someone they don't want, nor hide information from them. The army is also not a dumping ground for criminals. Someone saw value in your friend, something that the military could use. He probably did well. Most young recruits from such alternative enlistment paths work out great.