Ok, so I sent an e-mail to member services and just spoke with someone in authority at
DVC and he seemed to know what he was talking about, even if he did not give me the answer I was looking for.
THe issue is that DVC looks at each member as a seperate legal entity and without permission from that member, MS cannot simply link their reservation with another members reservation. So to MS, my two reservations were treated as two seperate reservations just like any other two reservations even though they were for the same people, staying in the same room for consecutive nights. Also under their rules any change in reservations requires a change in room keys regardless of whether it's the same people staying in the room.
According to MS, there are solutions to the check out check in problem:
1. Have myself added as an associate to my friends account...not practical for a one time reservation,
2. Have both members call MS at the same time and give permission to have the two reservations linked...possible... or
3. Have one member transfer the points to the other member and then book the reservation as one reservation...another possibility.
DVC is very much aware of the situation as they have heard from other members on this same issue, but there is nothing in the works to "fix" the problem. My hunch is that DVC MS wants to avoid any legal or security issues related to a botched reservation link if they try to "fix" the problem, so for the time being it's gonna be ....check out, check in and get new keys.