It's no wonder your friend was confused...your "storage/memory" dichotomy is absolutely stupid.
For non-tech's, they expect the names of things to indicate their function somehow, and that will be somewhat analogous to non-computing usages of those terms. This is normal behavior.
To make "storage/memory" as the words for "Hard-drive" & "RAM" guarantees confusion.
1. We already have logical terms that roughly distinguish the two functions: RAM and ROM...there is **NO NEED** to add another layer of abstraction. New computer users have to learn the concept, so learning two new words is the same as learning to associate two old words with new meanings.
2. "storage/memory" are too broad and both words have the same connotation. There is no logical reason a non-tech could know which was which without someone telling them. "RAM" & "ROM" also require this, but their ackronyms have different meanings which denote the difference in function.
3. Some of "storage" is used as "memory"...some times HD's have a portion that is used to supplement regular RAM
I know 'RAM' and 'ROM' arent' perfect but that's a false bar for me to meet. No terminology is perfect, but using RAM/ROM would end all confusion on this topic permanently.
Really, it would....non-tech's can learn the difference between "BAKE" and "BROIL" then they can learn this.
Your friend is actually thinking more logically than you!