Does chopping steak negate the benefit of using better meat?
If it's a properly done cheese steak, and it's not sliced in the same direction as the grain of the meat, he's probably right.

It's quite possible that a cheaper cut of meat would have a "beefier" flavor, just because many of the tougher cuts of meat tend to be more flavorful, partially because of the fat content.

All of that being said, it's really a matter of personal preference.  Some of of the places near me use the equivalent of "steak-ums" and not everyone's a fan of the texture.   If you want to find out if it's worth it for you, get a few friends together, order two subs with the same toppings, one with the upgraded meat, one without, and do a taste test.  (and if you can, get one person to order it and label the packages, then hand off to someone else to portion it out, so it's at least closer to double blind, particularly if they use two different labeling schemes)

update : Unlike chicken, beef doesn't have the obvious distinctions between light &amp; dark meat; the normal rule is that the further from the hoof and horn it is, the less that muscle group has worked, and thus the more tender it is ... but as with chicken meat, it's the working muscles that tend to be more flavorful (although tougher cuts).  And as with chicken, it's the fattier meat that has more flavor.

Some cuts of beef have the grain run in one direction -- because of this, we can cut the meat across the grain, which tenderizes it.  It can be done before cooking, as with philly cheesesteaks, or afterwards, as is done with fajitas.  Common cuts used for this sort of treatment are flank steak and skirt steak, which may be difficult to find in all grocery stores as so much seems to be diverted for restaurants.

Besides cutting, other aspects of processing (eg, aging) can affect how 'beefy' the meat is.