So... where did he save his files?? Network drive?
Maybe he was just under the impression that files on the desktop were not in the hard drive.
I just fired up sheepsaver to check: in the olden days of mac the desktop appeared to be the root of the filesystem, so the hard drive was just one level inside the desktop.
A side point, the desktop was cleverer about that: it was supposed to be a temporary working space somewhat outside the filesystem, rather than its root.
Files from a volume still knew where which folder they were supposed to go in on that volume - if you dragged them to the desktop to work with, the "Put Away" menu command would put them back there (sadly lost in OS X). If you ejected a disk that had working files on the desktop they'd vanish, of course.
Oh my gosh, you just gave me some serious flashbacks to college.
In the early 90's I was helping a high school student (son of a relative) [1] with problems he was having with his Mac Powerbook duo 210 [2].
Noting that he had no files on the desktop or anywhere I said "hmm looks like you don't use this computer much!". To which he replied a bit snottily "You mean I don't use the hard drive. I do use the computer".
[1] He is now a Physician with a high end dermatology practice and several offices. He went to a 7 year MD and undergrad program and graduated first in his class. He always had to appear smarter than the rest as displayed by his comment to me (much older and using computers for quite some time at that point).
[2] http://support.apple.com/kb/sp154