Hello again jgnat.
Your friends response is typically JW. It's most likely how I would have responded a year or so ago.
JW teaching on the question of what happens at death is simple and clear, and is stated as fact by the Society. A friend of mine who had just lost his mother when he was contacted by the JWs told me that their explanation of death and what happens afterwards was one of the things that attracted him to the Watchtower. All other religions seemed vague about it, whilst JW teachings were definite - his mum wasn't either in heaven or sufferring torment, she was merely in the grave, waiting to see if she found favour with Jehovah in the resurrection, and knew nothing of her condition. I can see how comforting such information would be to someone who has lost a loved one.
As for God's permission of wickedness, free will is obviously the answer, though of course the JWs see it as a universal issue between Jehovah and Satan to prove that man will serve God out of love, and not for what he might gain from doing so. I used to believe that, but sometimes used to wonder why this issue was taking so long to settle.
True happiness Watchtower style supposedly comes from knowing that one is doing Jehovah's will, by obeying all the edicts laid down by the WTBTS to the best of one's ability.In reality, that is more the source of guilt and misery than happiness, as no one can truly serve God in the way the Watchtower says he requires. As JWs we were repeatedly told that we were the happiest people in the world, and for a lot of the time I was semi-happy, but always plagued by the underlying feeling that I had not done enough for Jehovah. Like love, happiness is not something we can find by searching for it.
The picture that the Watchtower paints of God is that of some kind of wrathful, demanding deity who requires everything we have to give, and still isn't satisfied, a God who wants to interfere with every aspect of our spiritual and personal lives. It would be difficult to have a close relationship with that sort of God, and none too desirable.
The reality is that we all have a relationship with God, whether we believe in him or not. The nature of that relationship, whether we love, hate or ignore him, will dictate how we conduct ourselves in our everyday lives.