PJ is correct...the passport is only required to get back.  I like his idea...go anyway...show your ID and Birth Cert. at the US border and tell them you lost it.  Worst case scenario....you're there for a few hrs while they check him out.

I predict they will let him cross in time.

PJ is absoutly correct, Canada is a special case they do not require a US passport to go over.  They want your money...Lost passports are something that happens, the US border will probably be willing to allow your friend back to his home country, they are not there to keep you out...they need to make sure unauthorized people don't get in, and when US citizens return we do not bring any of the wrong things back.  Drugs, meat, insects, diseases (long list). 
If you have a valid unexpired US drivers license and a birth cert you will probably be OK.  It is your call sounds like you are a bit stuck. 
I travel internationally...a lot lately...and the last time the Scotland airline people were all in a huff because my passport is getting shabby and was starting to tear.  They denied me boarding, on one airline and I went to another and they allowed me.  When I got to US customs, they explained that the airline has no authority to stop me from leaving and it is up to the US customs to allow or not allow people into our country.  And they usually give US people the benifit of the doubt.  Remember they are citizens too.  I would have allt he docs, be polite and appoligetic and gracious...attitude goes a long way.