Yea I get that part, it just seems like the standard is being applied somewhat randomly if an administratively discharged officer butter bar can be cleared to apply for a lateral but others can’t. Anyway like you said maybe it didn’t pan out for him anyway.
I understand the logic that if you’re too senior in grade it’s a struggle to get the experience that your fellow aviators received working their way up organically. However the Navy is literally the only service that more or less bars PS officers from pursuing aviation, whether that’s through OCS or a lateral. Granted it’s not easy with the other services, but as long as you’re not more than 5-8 years TIS, there’s usually a path. Taking a step (or two) back in grade is totally legal too but the Navy doesn’t seem to consider that. I’ve seen a couple comments on here from Naval Aviators that say the branch might be passing up well-qual’d candidates from the officer corps, who just lack the aeronautical rating from the military. Now if the Navy feels that it’s a numbers game and they don’t need to open the recruiting pool any further to meet their goals, then I guess I don’t really have an argument. But if shit hits the fan and pilots are out there getting killed in a real war, I wonder if the tune would change.
There's three-ish flaws to your argument:
1. "Your buddy", the Marine O-1. Even though he was IRR, he is still technically in the Marine Corps, so his move was an inter-service transfer.
1a. For someone with <2 years commissioned service, there is still plenty of wiggle room timing wise to complete flight school and all required aviation qualifications before they are considered for O-4. For you case as well as others, by the time you finish flight school you'll likely either be in zone or close to being in zone for O-4, with no qualifications under your belt. You will likely 2X be passed for O-4 and sent home - losing any sort other ROI the Navy invested in you.
2. You're making the assumption that Navy is hurting for naval aviation candidates. That is not the case. There is still a demand of interested applicants across the various Navy commissioning sources (USNA, NROTC, and OCS) that there really isn't a need to try to tap into other resources like current/prior officers.
If you are so interested in aviation, perhaps check out the Army, National or Air Guard which appear to be willing / accepting prior service officers.