A friend has come to visit me in Thailand. He entered on a 30-day exempt but then went to Siem Riep by car, and just came back on a 15-day exempt entry by land.

Now he's thinking he'd like to stick around for 2 or 3 months, to consider retiring here.

He could go to Vientiane and get a Tourist Visa, but I was wondering: since he is over 50, couldn't he go to Immigration and get upgraded to a non-O? Just as if he would be preparing to get a 1-year extension based on retirement?

That seems too easy, so I think I must be overlooking something.

Only if he meets the financial requirements and show them to immigration along with the form. But normally at least 15 days remaining on current stay is required. Perhaps better to try for a single non immigrant O visa from a Consulate and if that is not issued a tourist visa and then do the extension or conversion/extension.