Seems very embellished. From what I know of minecrafters, it's very likely they would have flattened the ground, set up a tree farm, and starting communally building within the first hour or so of play.
The only competition would have been for highly scarce materials, however the other key point is that it's trivial to make another nether portal once you have access to the nether.
The claim that "the other team tore down the portal to use in their castle" is ridiculous. No veteran minecrafter would destroy a nether portal just to use it in their castle wall. If anything, they would just make the portal into the castle wall.
Or torn out a single segment and them opened another portal, thereby creating two portals in the Nether and another whole portal worth of obsidian... that's just my experience with portals from many many months ago, though.
You're exactly right - as long as the portal was rebuilt far enough away (or take down the first portal), it's literally a way of generating more (obsidian) blocks in the world.
Or work with a friend, have that person take out the portal's nether entrance, then just restart the normal portal = boom, 14 more bricks.
The only competition would have been for highly scarce materials, however the other key point is that it's trivial to make another nether portal once you have access to the nether.