This situation happened in our friendly game where 2 players had feelings for each other and were keen on helping each other. Because we already had a house rule in play that limited the amount of times someone could offer their help, eventually they couldn't legally help each other. However, when a player A was fighting a monster, player B who was not in that combat, played "-5 to a Monster", thus making player A win. Player A was not on level 9, so the result wouldn't end the game, but I felt it was against the rules. However when they argued with me, I couldn't find anything in the rules that would explicitly say Munchkins can't help each other outside of combat. Any words about "the competitive spirit" wouldn't matter to them.
You can absolutely play cards to help other players, even when not involved in combat
From the rules (direct PDF link)
You can interfere with others’ combats in several ways, including:
Use a one-shot card. You could help another player by using a one-shot to strengthen his side. Of course, you can “accidentally” strengthen the monster with it, instead . . .