Sounds kind of shady, and I've done my fair share of exaggerating, e.g. if I've spent 5-10 minutes dicking around in a programming language, I'm listing that as "proficient".
I'd say in general I've had nothing but negative experiences with staffing agencies, and this sounds like a similar sort of deal. Does your friend get paid for working at this company when he's not 'on assignment'? I guess I'm not clear if this is the typically scummy staffing-type thing or a more legit consulting-type gig.
I also doubt that the company will have his back if things go poorly, so it's up to him to figure out how far he is willing to stretch things. Personally I will list anything that I feel I can learn in time for a second interview. Fake it till you make it.
Getting hired is a skill that has little to do with one's ability to handle an entry-level software developer's job IMO.