I can find nothing specific with regard to a PT Failure or Overweight disqualifying a Soldier for receiving the Good Conduct Medal. The Commander has a lot of latitude in this situation and the commander could find that this in and of itself is not grounds to revoke the award. However the Commander could also find that 2.5 years of PT failure and Overweight do not warrant the award. If the first line leader believes the Soldier should not receive the award, I would recommend they counsel the Soldier and recommend the Soldier not be presented the award. From there it is up to the chain of command.
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