I was looking at this as well. Perhaps they were below the hill and could see the PAPI and the controller could see them -IF- there was some kind of refraction of the lights (both ways) due to humid air lying over the crest of the hill and they were effectively looking through a mirage. That would explain how a controller could see an aircraft that was below topographic line of sight and the otherwise inexplicable descent of the aircraft.
Just because the crew could see some of the runway lights over the crest of the hill doesn't mean the aircraft would clear the crest of the hill.