I'll try to wrap this up so that we don't stray too far off topic.  The whole point of bringing this up was just to point out that a DM's interpretation of the Hiding rules in general will impact how he might rule on the Lightfoot Halfling's ability to Hide behind other creatures.

To answer your question, it is important to realize that the Hiding rule in Chapter 7 only discusses the mechanics of how to resolve attempts to Hide.  There are other rules sprinkled throughout the game, particularly in Chapters 7, 8 and 9 which give context to what it means to be Hidden and when and how this might come into play.

First, as I've already pointed out in my above posts, the game consistently uses the word "notice" in the context of noticing threats.  Allies are not threats.

Second, it is important to realize that hiding is a deliberate action that is taken by a creature which has a specific purpose.  Being hidden does not just mean being unseen and unheard.  Attempting to Hide means taking a deliberate action to become and remain unseen and unheard in situations where you otherwise would not be.  I've already quoted a half dozen rules above that supports this.

For example, consider what happens when party has just entered the castle through the front door.  It is possible that far down the hall and around the corner and up the stairs and around another corner and through a locked door there exists an enemy creature.  It is likely that the party does not know about the existence of that creature and it is likely that the creature does not know about the existence of the party.  In both directions, the enemy is currently unseen and unheard.  But that doesn't mean that they are Hiding.  They might just be going about their business in broad daylight.  No action was taken and no attempt was make (no stealth roll was made) to become and remain Hidden.  The idea of Hiding is that if this enemy were in this same room instead of that other far away room and if that enemy is generally remaining aware of threats then that enemy would automatically detect the party . . . UNLESS the party has attempted to remain stealthy when this encounter occurs.

So, to go back to your example -- if creature A discovers creature B and it makes sense in this game situation that creature C still does not spot creature B -- then that means that they were not in proximity in the first place where creature C would have automatically spotted creature B if creature B never made the attempt to Hide.  In such a case, creature B is indeed no longer Hidden when discovered by creature A (as per the rules for Hiding) AND still remains unseen and unheard by creature C for reasons other than Hiding.  If he wants to ensure that this continues to be the case while creature C approaches then he will have to make another attempt to Hide (the prerequisite for this would include killing or evading creature A before attempting to Hide since he cannot Hide in plain sight).

Hopefully that explains things well enough.  Many rules have been quoted.  Otherwise we can agree to disagree and let people get back to discussing Halflings.

I didn't see it posted yet but there is also a Sage Advice Compendium Q&A on the topic of the Naturally Stealthy feature; 

Do the lightfoot halfling and wood elf hiding racial traits allow them to hide while observed?

The lightfoot halfling and wood elf traits—Naturally Stealthy and Mask of the Wild—do allow members of those subraces to try to hide in their special circumstances even when observers are nearby. Normally, you can’t hide from someone if you’re in full view. A lightfoot halfling, though, can try to vanish behind a creature that is at least one size larger, and a wood elf can try to hide simply by being in heavy rain, mist, falling snow, foliage, or similar natural phenomena. It’s as if nature itself cloaks a wood elf from prying eyes—even eyes staring right at the elf! Both subraces are capable of hiding in situations when most other creatures can’t, but neither subrace’s hiding attempt is assured of success; a Dexterity (Stealth) check is required as normal, and an observant foe might later spot a hidden halfling or elf: “I see you behind that guard, you tricksy halfling!”