Yes, she can use it but her Cultivation Method only boost the power of Martial Arts of the Ice element.
The Martial Art Water Punch was also useless because it was available in the Martial Hall of the sect. Moreover, it wouldn't benefit the boost of her Cultivation Method because it was a Martial Art of the Water element and not of the Ice element...
It was not said in the sense that it was forbidden to use them during the preliminary. The referee of the preliminary round saw him using a Martial Art but didn't disqualify him.