Well without bones you wouldn't be able to breathe. his is because the weight of yuor flesh, even on a thin person would be greater that the energy you culd give your muscles to expand your chest cavity and suck air into yourlungs (its a common misconception that your mouth sucks in air; its actualy the lungs bein g expandad what creates a vacuum which air them fills). Even if you could use your muscles they would have nothing to contract on and so your diaphragm would be stuck.
Your brain would fill with blood as the blood-brain barrier would no longer exist, all your facial features would sink into your brain and throat the flesh and skin would fold over them meaning you could not see or eat, or breathe again even if the last paragraph was wrong.
Blood flow would be constricted as the movement of your muscles actual helps the heart pup blood around the body. The heart doesn't have the power to get blood round all the way, especially when your sleeping or reclining so when you contract muscles it squeezes the vessels pushing the blood through. Everyone fidgets in their sleep and would othrwise have serious blood conditions. Therefore eventually it would just pool in the lower part of your body much like a dead persons blood does. Cause you to go stiff and die, chances are would already be dead though, in the few minutes this would take to happen several otherthings described above would be happening.
It is possible to last with an arm/leg with no bones provided with only brief and the limb is stimulated and moved.
In order to have no bones you would need to be held up with a frame, pulled gently outwards in order for you to breathe, have some sort of flexible lattice in your chest cavity and a few other things to stop your head collapsing in on itself. To be honest i would rather be dead than alive with no bones.
The reason why octopuses, jellyfish, krill and other small creatures of similar structure live is because the water supports them and reduces the effect of gravity, lifting an octopus or jelly fish out of the water would kill it instantly. Also these are much smaller and simpler animals which do not need, due to evolution and adaption, and infact have advantages through not having bones. We need bones, and there's an end to it.
Tell this to your friend and then point out that he was PWNED, by a 360 owner no less. If he can counter an of these argument without straying into life support territory then i would live to hear it. Simply saying I'm wrong with no arguments wont hold water I'm afraid.