I'm not sure if this is UH's policy or if the person who got below a C was an exception because his other grades were high enough that UH let it slide. It's safest to keep all grades above a C as it'd be silly to get this far in the application process, be accepted, and then have the acceptance rescinded because of a low grade.
As for pass/fail, it probably doesn't matter as long as the student passes. Personally I dropped a class that wasn't part of the pre-req courses for UH after I accepted. It didn't affect my status.
I don't think it would look good if you withdrew from all your classes either. I'm taking some elective courses for other schools; however, I no longer need them. Now I'm stuck with them.