My dendrobium recently lost all of its flowers so my sister cut the stem about 2 inches above the top set of leaves. I know you can do that with phals but is it a correct move for the dendrobium?
Yes, it is ...
a few, but not many, orchids can rebloom on old spikes, I don't think Den-phals do. Cutting a spike when blooms are done will never hurt the plant - you may just miss out on some blooms if it is one that can rebloom on old spikes.
Of course, it doesn't hurt to leave the spike til it's withered and dead either ...
So either way, it's fine
Same here. I think it best to cut the spike as long as you leave the cane intact. It may grow new spikes on new canes, but sometimes will grow them on old canes as well.