I think what they don't like is the fact that a DRY K&N filter has next to no filtration capability and particles just slip through the cotton. This is probably also the reason you see such a dramatic improvement when using a parts-store demonstration unit, because the filter is likely DRY and shows far greater airflow than real-life circumstances.
K&N filters, and any other such cotton filter or foam filters, MUST be oiled as regular maintenance. It is the oil and not the filter element that traps dirt. If you were running an all-out race engine, though, and didn't care how long the engine lasted, you could put a dry K&N in there. It will give you almost unrestricted airflow while keeping leaves/debris/small children out.
Your buddy's instructors should try reading the directions sometime.