CT,
On the '99 CRV, a drain/refill replaces 3 qts of the total 7. I would not be concerned about the brown fluid at all; I've heard and seen myself, many situations where Honda ATF-Z1 has turned dark brown within 15K and smelled burnt. One person on this forum ran the Honda ATF-Z1 (factory fill) in his RSX for 70,000 miles before the first drain and refill, and his fluid analysis at 60,000 miles showed the fluid to still be in serviceable condition. I'm sure his ATF was dark brown when he drained it at 70,000.
Honda has never recommended a full flush. They are very firm on recommending against a flush. Their recommendations are to drain and refill at a designated mileage, and to do three drain and refills only if the transmission fluid was contaminated with a non ATF-Z1 fluid.
If your co-worker has the skills, have him drain and refill the transmission, and disconnect both cooler lines. Place the lines in a bucket, start the car, allow 3 quarts to come out, refill, repeat, and top-off. Easy way for a complete fluid change. Otherwise, your advice to him in regards to draining and refilling at each oil change (for the next few changes) sounds reasonable.
Genuine Honda ATF-Z1 is a good choice, but the Amsoil one seems to work well as well and does not turn brown as quickly, not that it matters, as I suspect the Honda fluid just happens to lose its dye very quickly, and happens to produce a unique "burnt-like" odor, that is similar to ATF+4.