Irrespective of whether or not it's legal/sensible to use an ILS overlay to fly a non-precision approach, it seems to me the problem here was an inappropriate choice of autopilot vertical mode to carry out the approach.
Having missed the descent point for the NDB approach, the FO selected FLCH to commence the descent. Having done so, the only terrain protection available was the 1,190 ft (MDA+50ft) set on the MCP. If they'd stayed in VNAV and simply pressed the Altitude Selector button on the MCP, the aircraft would have commenced the descent in VNAV SPD, captured VNAV PTH when the correct descent profile was eventually intercepted, and respected any intermediate altitude constraints entered in the FMC.
VNAV is a great tool, but there are plenty of traps.
Last edited by BuzzBox; 12th Feb 2008 at 03:14.