Yes, it is OK to install an insert in a prefab fireplace. I have this type of set up in my home.
A few things: The insert needs to be listed by the manufacturer as "approved for zero clearance (prefab) fireplace installations". And it needs to fit. You have already discovered that some models will not work.
Most prefab fireplaces are on the smaller size, and getting an insert of descent size (for overnight burns) to fit and still be able to make the flue connections and have the flue collar on the insert line up with the current prefab fireplace flue can be a challenge. Tell your buddy to make sure the insert flue will line up with his current flue, this is important and may limit what he can actually buy.
Also, the chimney liner is a good thing for a few reasons. The 6" diameter of the liner is matched to the insert. Meaning he insert is designed to use a 6" flue for best efficiency and proper air flow.
The insert moves less air than a fireplace, but is more efficient so it puts out more heat and hotter flue gasses. So, the way it is made (material type), the chimney liner can handle the higher temps that the insert flue gases put out. The prefab double wall chimney is not designed to handle those kinds of temps. Could be a fire hazard if a chimney liner is not used. Besides, cleaning the chimney would be a hassle because the insert would have to be removed every time the chimney was cleaned.
One more thing for your buddy, have him insulate the liner before he installs it. Depending upon chimney location (inside or outside wall) and geographic location, the insulation can really improve the way the insert operates, and it makes it a safer install. Some manufacturers of the liners require the liner to be insulated. Good luck, KD
