Why are "Egyptian God" cards so significant?
They were represented in the anime as being incredibly powerful, and you never saw them defeated by traditional means. In the card game they act as normal cards and have no special "you can't destroy me or target me" abilities I'm aware of (I'll admit it's been a while since I played Yu-Gi-Oh as I moved over to Magic, but I played quite a bit) 

Your friend sounds like he's putting a more flavourful edge to things as it makes sense when you look at the anime, but it's not how the game actually works. 

Also, if your friend continues to make up rules and cheat, I'd look to find a way to "punish" him in order to correct his behaviour. Stop playing games with him when he does it for example. If he really wants to play the game he'll learn to play correctly if you just show him that cheating doesn't pay off.