We have been to Orlando 4 times and never stayed onsite.
This is not a flame at all, but please be careful about expressing opinions on staying on site when you've never stayed on site.
I don't think the OP's co-worker was thinking about putting 8-10 people in one room. That would be awful. Having down time at Disney is easy. There are TONs of things to do other than the parks. That's one of the things you get to do when you stay on-site and not off. Just to name a few....
- relaxing at your resort at the pool or spa
- increadible scenic jogging trails
- movies under the stars at the resorts
- animal programs at AKL
- aquatic/underwater programs
- bicycle or four-seat surrey rentals
- dockside resort fishing of full fishing excursions
- tennis, volleyball and other sports at the resorts
- kids programs (this is especially awesome at AKL)
- sea Raycers, kayaks, pontoon boats, canoes, sailboats and pedal boats
- sandy beaches
- strolling the boardwalk
- NASCAR racing (yes, you drive!)
- special cruises at certain resorts
- nightly fireworks
- minature golf and professional golf courses
- carriage rides
We've stayed on site and off site. In our opinion, especially with kids, if you are doing Disney or mostly Disney for your trip then convenience wise it makes sense to stay on site. If price is a factor then stay at a value, moderate or the WDW Swan or Dolphin.