I find this event in the Friends episode "The One With The Flashback" even more intriguing than another question I had posted some time ago. In later seasons, it is well established that Chandler & Rachel know each other from college as well as thanksgiving dinners at the Gellers'. How then did they not recognise each other when Chandler dropped the ball?
The usual explanation is that Rachel and Chandler simply didn't recognize each other.
it is highly unlikely that Rachel wouldn't remember a guy that was the reason of Monica loosing weight, that she was in ER with after he lost a tip of his toe and that she was kissing on a college party
more importantly, in the first episode Monica introduces Chandler to Rachel - if the two had met each other several times before Monica would surely remember this:
This is everybody, this is Chandler, and Phoebe, and Joey, and- you remember my brother Ross?
This means that initially Rachel and Chandler simply didn't know each other before her moving in with Monica and their past was retconned in Season 5, most probably to add some interesting events to Monica and Chandler's history. The bottom line is that this is just another Friends plot hole, albeit one of the biggest.
Chandler did know Rachel well before they actually became good friends. of-course she was the friend of Chandler's best friend (Ross) Sister. Having said that, Chandler probably took Rachel as just another friend of fat Monica. did not pay much attention nor did care much about Rachel Specifically, more because he had probably never thought he will end up living across the hall from her and share good friendsship
Only thing happened between them was that chandler used his sarcastic instincts and rachel being posh rich girl, just ignored him. she even didn't give much attention to monica. she just showed her engagement ring to her and gave only one look at chandler. so to chandler, rachel was another girl he failed at flirt and to rachel, he was just another guy she sees at a bar