The only time it makes sense to run the main speakers as "large" is when they are at least as capable of deep bass as the subwoofer. Otherwise, one will be losing some of the deep bass in the main channels that one would get if one would redirect the deep bass to the subwoofer.
The way the processor should work is that all of the LFE channel (the ".1" in a 5.1 or 7.1 system) goes to the subwoofer, and consequently there would be no bass management selection if one sets all of the other speakers to "large" ("large" means that the entire frequency spectrum of the channel is sent to the speaker, so there is no bass management used in this case). So I think you are reading the Rotel manual correctly, and that your friend is confused, and is in fact diminishing bass above 70 Hz in the LFE channel with his system set up as you describe.
In other words, your friend is missing out on bass (that he could get from his system) in every channel with things set up the way he has it, unless his main speakers are as capable of reproducing bass as his subwoofer, in which case he is only missing the upper bass of the LFE channel. But unless he has great main speakers (or a really lousy subwoofer), his main speakers are worse at reproducing deep bass than his subwoofer.
Edited to add:
If you want advice on the proper settings specific to your friend's system, we would need to know what speakers (including subwoofer) we are discussing. Generally speaking, one should select a crossover frequency above the -3dB point of the bass response of the main speakers. For example, I use bookshelf speakers with a frequency response of 50-40,000 Hz +/-3dB, and therefore I should select a bass management frequency above 50 Hz. I have mine set at 80 Hz. If my speakers had a -3dB point of 30 Hz, I would probably select 60 Hz for the crossover point, though 80 Hz would still be okay. It is best to not go much higher than that, because otherwise one may be able to locate the subwoofer by sound alone. But if the main speakers cannot go that low, either one sets the subwoofer to go higher, or one diminishes the bass between the crossover point and the low end of the main speaker. The former is preferable (i.e., setting the crossover higher, so that one gets all of the frequencies at approximately the correct level, insofar as one's system is capable of reproducing them).