Heatherliis, your friendship with this guy, and persistence with the problem is impressive. Especially for a Mac user!
I'm not an expert by any stretch, and have no desire to hijack any aspect of the help offered on this thread, but have a bit of (self-inflicted) experience with this sort of thing.
I can tell you that everything that has happened to this computer fits with the description of what several variants of malware can cause; disabling the control panel, disabling his admin rights, and creating the rogue anti-malware popup. (Some of these include the rogue programs SpyDawn, Spylocked, the Vundo trojan...there are plenty.)
I believe that is the most likely explanation, but it is entirely possible that some of the same results could be achieved by having Avast delete important system files. This is much less likely.
The approach to this has to be to disable the malware from running at startup, and then to regain use of the systems required (control panel/admin) and then to clean the malware from the system.
To assist with this, the names and locations of the items found would be beneficial, and also any that are in the chest.
If he can't find his OS disk, and M$ are telling him his installation isn't genuine, his options become rather limited, and the repair more difficult, but it still may be possible.
I urge you to get him to track down that disk- there is a code on it unique to that disk, and therefore his installation - and to yield the info on the names of the files that were identified, exactly. ie: capitalization, locations of files, slashes, complete names, matter.