You are both right. There are several, different, extensions of the reals. The "projective" extension turns the real line into a (topological) circumference by adding a single point at infinity. The "affine" extension turns it into a closed segment by adding two infinities, one at each end; this corresponds to the convention used by ieee floating point numbers. There are many more extensions, like complex numbers, dual numbers, p-adic numbers, and in many of them (except complex numbers) you have various kinds of divide-by-zero fun.
For example, if we take a mercator projection of the globe onto a 2-infinite-ended cylinder, the latitude coordinate could meaningfully be either +∞ or –∞. If we take the stereographic projection of the globe onto the plane, every pair of coordinates with one infinite value corresponds to the same point on the sphere.
Not quite. The extended reals are ℝ + {inf, -inf}. This has the problem that 1/x approaches inf from the right and -inf from the left.
As ogogmad notes, in order to define a value for 1/x at 0, you need the projectively extended reals.