So far, thanks everyone for your genuine and measured advice. It's all been really helpful and has made me consider things I hadn't before.
As a friend of the guy I suggest you tell him to back off on the proposal part. There is no reason for an 18 year old to get engaged and it just makes the whole thing look worse for him. Is he trying to provoke the parents? Is he trying to cement the relationship via engagement? If the latter than he needs to ask himself why it's not strong enough to just move along at a regular pace without the big heavy deal of being engaged. THAT is the part that sounds manipulative to me. An 18 year old girl might be very much carried away by the romance, as the older person in the relationship he needs to take into account her age and lack of life experience and be willing to wait several years at least. If it's two 18 year olds getting engaged it's a bit silly.. but if it's a mid 30's person proposing to an 18 year old a whole lot of other things come into it. The guy needs to be the mature one making mature decisions, not the impulsive one.
What's interesting about this is that the whole proposal thing was brough up by her. From her perspective I think she feels that no one is taking this relationship seriously, everyone is expecting it to fall apart at any moment, especially her parents who feel this is no more than an affair. So the proposal is a bit of a stunt, but they insist that the feelings behind it are completely genuine. They are rather conservative so in their mind the man has to propose. In the end though it was her initial idea and it took some convincing before my friend felt it was the right thing to do. To be honest I think he still has some doubts, not because of how he feels but because of how sensitive everyone is about the situation. It's one of the reasons why he wants my advice. People might feel this is nobody's business and they should figure it out by themselves but they are under a lot of pressure and I think they are looking for a way to calm the waters. An engagement certainly would force the parents to acknowledge the relationship on a different level then they have been prepared to do until now. Would it annoy them further? I'm not sure, they couldn't accuse them anymore of not being serious about their relationship.
In the end I believe what others here have said is true. Time will decide the outcome of this. Time will demonstrate commitment, it will mellow people's attitudes and it will put them both to the test if they really are suited to each other. So they will probably have to stick it out and deal with the criticism and resentment from everyone as long as it lasts. And my prediction is it will last for a very long time so maybe they just have to get used to it.