According to the NDA, sludge wave hits all adjacent targets, so I assumed that included allies. Second, it also states that Rest heals any new statuses received while the user is sleeping, but I could've gotten that wrong.
The bolded part is the one we're talking about. To be honest, I misread it at the first couple of times as well, so no big deal. This is a simple edit.NDA regading Rest said:The user takes a soothing nap, rejuvenating themselves in the heat of battle. When Rest is used, the user puts itself to Sleep for three (3) actions. Every time the user spends an action asleep, including the action they use Rest, they will cure themselves all non-Sleep status ailments and recover 12 HP. Taking 18 or more damage from a single attack will end the user's Rest. This move uses up one of the user's available recovery moves in a battle.