Atleast what I have learned for wicket keeping is to always be on your toes. It is very difficult to take the balls side ways, specially if your up to the stumps with flat feet.
Also regarding the knee wear and tear, I doubt that flat feet will help to reduce it. In weigt lifting(squatting) its beneficial to keep you feet flat to maintain the balance and reduce unecessary pressure on you lower back, but for WK I think the best thing is to be on your toes.
Just clarify with your friend, for what reasons he has been told that his form is not correct ?
Check whether your friends,
1] Stance is correct(width between the foot), bending etc. I dont think standing on toe would be an issue.
2] Rising with the ball. This is very important when keeping up to the stumps.
3] Hand positions, I have seen few keepers who stretch their arms too forward and hence loose their balance. This mainly happens when your learing to reciece the ball, you try to take it way forward from your body.