And he could never do this, he thinks that it is very stupid to provide his passwords anywhere.
I just tried this on my own Facebook account with both Google and Hotmail (my FB account is attached to the Hotmail account), and neither option in the Find Friends section requested any password. I am already authenticated with Google and Hotmail in another tab, so it is likely that it never prompted your friend for a password.
I can't honestly see this as being a chance for Facebook to inflate the use of the Find Friends portion of the site.