Weird Problems with Starving Venom Fusion Dragon
You asked two questions, but the real answer why your friend couldn't do that is:


Starving Venom Fusion Dragon explicitly says that it can only target Lvl 5 or higher monsters.


Nor Gardna not your XYZ apply to that, as Gardna is lvl 4 and Cyber Dragon does not have a level (as it is an XYZ monster, it has Rank instead). Although the XYZ is Rank 6, Rank is not the same as Level.



To answer your other questions, only XYZ monsters can have XYZ materials. That means that such effect couldn't have been activated even in this erroneous play scenario.

Now, in YuGiOh some monsters can be set as Spell/Trap cards, such as the Artifact Archetype. However, they specifically indicate that you can set them in such way. Finally, even supposing you copied Gardna's effect and supposing you Starving Venom as Spell/Trap, the effect copied explicitly reads at the end (emphasis mine):


  [...] This card is Set in its Spell &amp; Trap Card Zone during your opponent''s End Phase.


So it is specifying it has to be set in its corresponding Spell/Trap zone. As Starving Venom does not have one it is logical that the effect can't be activated by failing to meet the requirement. 

Finally, as mentioned in comments, Starving Venom copy effect ends at the end phase. Thus, it will never reach the opponent's end phase for the setting effect to take place.