My understanding is the ATF operates under the concept of "once a machinegun, always a machinegun", generally. Even DEWATS are machineguns, just in a special category that does not require tax, license and other rules applied to "live" guns.
It may be other things, C&R, SBR, etc., but if it is a machinegun, then machine gun laws apply, first.
A shorty M16 (select fire = machine gun) is a machine gun under the law, and its barrel length is essentially immaterial.
The exact same gun as an AR-15 (semi auto only) is not a machinegun, its an SBR (short barrel rifle), and different rules are applied.
A 1914 Vickers gun is a machine gun, and well beyond the qualifying age for C&R status. But its a machine gun, and this legal status trumps all others.
I believe your friend is wrong. C&R does NOT exempt a gun from machinegun status and regulations.
All else being equal (and it almost never is) bigger bullets tend to work better.