I'm curious if your friend has had the opportunity to hear both operating as pre-amps with the same amp setup, or if he is basing his suggestions purely on specs. The 702 has 192kHz/24-bit DAC's, as does the 950. I'm not at all sure what he means by the processing being more direct - the 950 offers analog bypass on all input, so you can skip all digital processing on signals that you want to keep analog, and on analog signals that you process digitally or digital signals the signal path for the two units would be essentially identical. As for features, the Onkyo offers only a couple of processing modes that the 950 lacks. The Onkyo does offer Pro Logic IIx, which will generate discrete left and right surround back channels rather than the mono surround back signal produced by Dolby EX, DTS ES, and the 950's Cirrus Extra Surround. The 950 does include Pro Logic II, however.

If your friend is a salesman and is basing his suggestions on specs and experience with the Onkyo alone, I'd be a little wary. The 950 has continued to sell well in part because it offers very clean sound, which makes me suspicious of the assertion that the Onkyo would sound 10 times better. Owl's_Warder has a good idea - if your friend can arrange for a loaner sample of the Onkyo, you can use the Outlaw's 30-day return policy to compare the two side-by-side in your setup to see which one is best for you.