The main issue here is that Phoebe IS changing, no matter what, because she's one of the two characters BHG cannot recover. Now, you could recommend trying to get her to look similar, and that's what the "No" option is about, but even then, she WILL look different from how she looked in the rest of the game. That is not avoidable.
Since she has to be changed no matter what, just like Hope, BHG is asking about potentially changing her more drastically (though keeping her human).
My personal vote would be to make her look more like Red. Play up the cousins connection, so we can have a real ginger in the harem.