I dunno but I thought lod was resticted within Quake 3 quite some time ago already, before the days of PB even, just to prevent this sort of "cheating".
Yes, exploiting the unintended effects of certain values of cvars is cheating. Things like adjusting view bobbing to be able to look through floors can all be prevented by restricting the allowed range of cvars with PB.
I don't understand though why the uppermost values (highest quality) of LOD and subdivisions are forbidden. Perhaps cheating is possible in that range too, although i can't imagine how...
The following settings are enforced for internet play under OSP:
r_lodcurveerror must be set to 250
r_fullbright must be set to 0
r_subdivisions must be no greater than 80
r_znear must be set to 4
r_shownormals must be set to 0
r_showtris must be set to 0
Thats the one that will get you, there are some crazy flaws you can find with that set 100+.
Cheat? Its pretty iffy thats for sure. I would fall back on the old crutch that if anyone can use it and its in engine its not a cheat, but its a pretty weak argument when you can in some spots look through walls...