I think your buddy is BSing you man. 9.5 in the 1/8 isn't near 12.6 in the 1/4 - to run that 1/8 and 1/4 time, he'd have to have a BIG power car that spins for a solid 2 seconds through the 1/8 then picks up HARD, which he just isn't doing with 340 WHP at 3600lbs raceweight. I've seen stuff like that happen, but it's with cars with twice the power that your buddy claims his truck makes.
And like...why dyno the motor and they re-dyno it on the chassis dyno? Turbo 350s do fit behind big block Chevs, but almost no one uses that combination (BBC/TH400 is the much more common setup).
Not trying to be a jerk, it just sounds like the kind of stuff you hear at every car show/cruise where every car is super fast etc
All of my suspicion seems to be confirmed by the fact that your Wbody only lost to his race truck by one car length.