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.

Duo Dock floppy drive, likely (Howdy! -- friendy@Freenode)