I saw a private server, europe battlenet or something like that, which had an option to spy on player's inventory

It would only allow to see the items that you could see like helm, weapon, armor, boots gloves but not inventory where you store charms. Also you wouldn't be able to see the weapon swap. You could also spy on minion gear like valkrie, iron golem or shadow warrior/master. This gives you an idea on what it bases its info from.

You could press a key to spy while hovering your mouse over the player. I don't remember if you could spy on merc.