Sounds like you're just a couple of steps ahead of your friend in terms of getting to grips with iTunes.
There is an option in iTunes to CONSOLIDATE the Library .. and a setting in Preferences that keeps the iTunes Library organised in the iTunes folder. If you do not activate this setting, then iTunes will leave the music scattered all over your HDs and just store the path to the music in its XML library file. This is the way that many people like to use iTunes as it does not restrict them to keeping all their music in one set of folders.
Provided there is a good bit of space on the 2nd hard drive on your friends PC .. you could run this CONSOLIDATE MUSIC option and it would copy all the music visible in the iTunes listing into folders inside the iTunes Music folder .. making it easy to copy then onto another PC.
Otherwise if ALL the music is on the iPod .. and you want to go with your chosen path .. then get your hands on Yamipod .. it is FREE and will allow you to copy all the music from the iPod and restore it into a new copy of iTunes.