Do you think army height weight standards are outdated? What would be a more accurate way that take muscle into consideration?

The Marine Corps used to allow caliper or submersion body fat measurement. For males under age 35, as long as you were under 18% body fat you were good to go. I believe there is now a body fat electric conductivity scale that is a few hundred dollars, that is accurate to 0.1% It seems that putting one in the base clinics would allow a quick check on "questionable" or outside the norm body composition.

Well in the 70's If I am not mistaken there was no taping and many soldiers were in your situation. There were a lot of people that had been body builders, both before and after joining the Army. They did adopt the pinch test with calipers, a swimming pool flotation and calipers, then the present weight and tape system. It appears that when uncle wants to thin out the ranks they buy into the weight control program with a vengeance.. Just give the Army a little more time and they will improve on what they do now.

The standards are fine, in that the tape test allows for any achievable amount of lean muscle mass gain, as well as a max percent of bodyfat based on age.
If anything, that max allowed is generous.
But since the method of measurement used is the least accurate and easiest to implement, that generous max is required to cover the margin of error.
Calipers are more than twice as accurate as the tape test, inexpensive, and require minimal training.

https://www.militarytimes.com/2013/05/21/experts-tape-test-has-huge-margin-of-error/