Bloated? Never heard that before & interested to learn what you mean by it?
It's not the best pic to give a good idea of weight, conformation, etc. With the way she's standing, the light & shadows, only having one pic.... it seems that she is probably a reasonable weight, perhaps a little over weight & perhaps under muscled. If you look up an 'Henneke equine body score' site, this should give you the info to be able to judge her weight-wise. Eg. if you can easily feel & just visibly make out her ribs thru her summer coat that's about right, but is only one of the areas you look at for an overall appraisal, because as with people, we're all individual & altho when I breath in, you can see my ribs, I'm still overweight! :-0
You build muscle in horses the same as in any animal - exercise. Hill work is much better than working on the flat. I personally disagree *generally* with lunging for exercise. That tends to lead to boring, mindless circles & while it might give the body some necessary exercise, it tends to lead to the horse losing focus & motivation in you & therefore can lead to training/relationship/'respect' issues. If you can't/don't want to ride, driving or long reining, going for walks with the horse, getting them lunging around you while you're going somewhere or in/over/around obstacles are all good ways of exercising the horse without 'switching' their mind off you.