This is not really a nuanced understanding of things. The issue is not that there shouldn't be grief or sadness. It's that your friend who lost his daughter to cancer may be stuck in a way that is causing him distress and inhibiting his ability to live his life. He is recycling self blame and rage and needs help being able to move through those thoughts and feelings so he can grieve the loss in a way that's healthy. The DSM is not meant to pathologize people. It's meant to be used as a tool (similar to the medical diagnostic manual) to help us understand how someone is suffering and what kind of treatment they need.
Yes it is far from perfect. Similar to modern medicine it has evolved with time and better knowledge and should continue to. But I am actually glad to see that there is an acknowledgment that people may need help with their grieving.