Just to clear things up, he is offering to pay for the cost of replacing a frame... up to $100 dollars to cover the inconvenience as well seeing as I unfortunately do not have all of the tools to make it happen very easily. He's a ****ty rider but a pretty decent friend.

Anyways, before I threw $300 worth of parts on the Puch frame, I checked the BB, seat tube, and head tube for rust and it was astoundingly clean on the inside. He later mentioned that he had taken a spill earlier in the week... I'm guessing he did something to misalign the drivetrain in the process... leading to catastrophic failure?

I didn't mean that fixed gears necessarily put more strain on the frame but if the chain were to slip off, there's a lot more direct force to be applied without the slack and added chain length in a derailluer system, right... essentially more torque I would imagine?