Should a personal statement for grad school discuss large challenges in personal life? "Large" includes "health issues", among other things.

I know someone facing this situation. She has successfully used her story in applications to important programs during undergraduate, and it did explain some time she had away from school (I believe this includes broken time during her undergraduate study in total, I also think it was earlier on.)

There are reasons grad school may be different: "Can she finish?" is arguably top concern and this concern is agnostic to reasons and may be as simple as "troubled past, troubled future." And also simply the fact that people discriminate - conscious biases and unconscious biases are both common. There's a reason employment law (and I believe similar laws hold for grad school admission in the U.S.?) protects against asking about stuff like this.

Plus my general feeling is that a personal statement can really only hurt you. It helps them know the person they are evaluating but obviously the rigor of course study and research experience is what counts.

In short, would the professionals here corroborate my instinct? Or does personal story like this sometimes add positive weight to an application? And, often enough that it may in fact be worth it? 

I'll specify this is a science field for U.S. schools, I'm guessing that might help understand the circumstances but probably I don't need to be more specific than that.
My own experience includes the opposite of what you describe. I have evaluated statements of purpose (SoP) with specific stories of overcoming adversity where the story helped me conclude that this was a courageous person worth taking a shot at. This was, of course, accompanied by strong grades (though not necessarily stellar) and supportive letters.

I strongly disagree with your notion that an SoP can only hurt you.