I have not read this thread, only skimmed a few responses and last few posts.
1) I agree with your Pastor friends, indwelling only occurs under the New Covenant. Why couldn't OT saints be indwelt? Because they had not be washed with the blood of Jesus.
2) What does the term "born anew" mean. I believe we are conceived and born spiritually dead, i.e. in a separated from God state, for we are conceived in iniquity. Therefore to be born anew means we are made alive, i.e. in a united with God state. When God puts us spiritually in Christ, where we undergo the circumcision of Christ and we arise in Christ a new creation, we are "born anew. This is our "regeneration" which means to be originated again. Thus "made alive" regenerated, and born anew all refer to exactly the same thing, our conversion from a spiritually dead, separated from God, by nature a child of wrath person to be saved by the blood person. God transfers us from the realm of darkness, metaphorically "in Adam" to the kingdom of His Son, i.e. "in Christ" and transforms us by the washing of regeneration and the renewing by the Holy Spirit. This refers to us being indwelt. So indwelling only occurs after a person is spiritually in Christ. Therefore we are in Christ and Christ is in us.
3) Thus no OT saint was born anew before Christ died and He became the propitiation or means of salvation for the whole world. There gained approval through faith, but why did they go to Abraham's bosom and not heaven. Because they were still separated by their unholiness from God.
4) After Christ died, then He took the "captives" held in Abraham's bosom to heaven. Now when a person dies they either go to Hades, or to be present with the Lord in heaven.
This is the only view that is consistent with all scripture.
He would agree with your assessment. That said I do not agree with that but did discuss it throughout this thread.