I am by no means an expert, have a little bit of experience with these, as I have owned two of them. We have wheeled ours in moab, all through Colorado, and several times in URE. Feel free to ask any questions that your buddy may have that I don't cover (or attempt to anyway).
What model did he get? Base, Adventure, Alpha?
The Adventure model and usually the Alpha come with 33" tires stock. The '09 Adventure package comes with front and rear lockers, the '06 to '08 models come with a rear locker and front limited slip.
Bone stock you can run 33"s on any model with zero rubbing.
You can crank on the torsion bar a couple of times and gain over 2"s of lift in the front with zero ill effects. The 2" lift is free and allows you to run 35"s with no body rub- only a slight rub on the sway bar.
You can buy the Rancho 4" lift for $2500 or the Rough Country 4" lift for $1250 and they both get you the same result- the ability to run 36" or 37" tires. The big issue you will run into with that size tire is gearing- largest you can upgrade to in the stock axle are 4.56's. Plus steering concerns and the front IFS can start to be overworked on those size tires. Still, people are running them and tackling some amazing obstacles.
These things are monsters offroad. Despite the hate from the jeep crowd (I'm a jeep owner also), these are extremely capable. An '09 Adventure package comes with a 4 to 1 transer case, front and rear selectable lockers, 33" A/T tires and you can fit 35" M/Ts with out any purchases (no need for lift kits, SYE's, bigger axles, etc).
My wife wheels ours and she has taken it through Daniel 3 times now and only got hung up once. That includes 2 trips in our base model. I know Daniel isn't exactly an extreme trail, but it is a good litmus to compare to (most people know its level of difficulty or ease).
There is actually a pretty decent aftermarket for the H3s. Straight from the factory you can get beadlocks, offroad lights, sliders, and power upgrades. They make a 2" bodylift, winch bumpers, and just about everything else you would need to improve your offroad experience.
Here are some pictures of ours:
'06 Base model on 35"s:
'07 Adventure model on 35"s (have since added winch bumpers and lights)
