Lakeside013104,I think that many 250/2500's run over their GVWR, myself included.
Many that do compensate with Timbers, or Air Bags to correct what their springs can't handle, maybe their tires also!
The difference between almost all 250/2500 and their 350/3500 are heaver springs and possibly more cooling.
My way of thinking as long as the stock springs, and tires can support the load you are really not overloaded (start the flame throwers).
I tow over my GVWR, but well within axle and tire ratings, truck sits level and has not engaged the overloads with the 5er loaded for travel. My 5er weighs in at 11,000#+, yet tows fine and the truck sits level, and has the correct geometry, so that it steers correctly, this would be one of the issues with your friends setup.
Your friend at 16,500# is pushing DRW territory!