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Your friend's solution envisages the moving of people a la partition. It is certainly legal in the subcontinent since it happened already in 48. ie if a Sunni does not wish to live in Indian Kashmir then he can leave just like millions of Punjabis/Karachiites etc who were Hindus had to. The difference being that this time its a choice and they can stay or get money and sell their house and leave.
I dont think such plan will work as the problem is the flow of fighters from across the border, it will not end the suicide bombings or grenade attacks.
The only viable solution remains a European Union type framework for both India and Pakistna where Kashmir is transformed into a free trade zone.
no other solution will ever be mutually acceptable and talks will fail.
cheers
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