I have owned both a 4 cyl and a 5 cyl Colorado. Both 5-speed manuals. I won't own an automatic if I can help it. The 4 cyl got great MPG but was slow. The 5 cyl had 50 more hp and ran like an 8-legged dog. I too have heard there were problems with the early 2.8 and 3.5 engines, something about the cylinder heads having serious issues. I don't know all the details on it. I think GM may have issued some special warranty coverage for whatever the problem was with the heads on the engines. I traded my 5 cyl Colorado before the problems became very well known. Some others complained about the air conditioner making odd noises but I never noticed it. Also the AC was kind of weak unless you always had it on recirculate. Others complained of thin paint and I did notice the paint would chip pretty easily.
The 5 cyl was an extended cab and the 4 cyl was a regular cab. They both were OK little trucks but I thought they were kind of cheaply built. I never had any trouble with either one except the brake light switches broke on both trucks at about the same mileage. The only real problem I saw was with both trucks the doors were hard to close when you close them from the outside. And to save money GM only put a door lock key cylinder on the driver's door so if your friend likes to open the door for his wife/girlfriend he better consider keyless entry or get the LS which will have the OEM keyless.
All trucks willl have their good and bad points. The 5 cyl got about 28 mpg around town and over 30 on the highway. It was quick when I needed it to be. I wasn't real crazy about the drive by wire system. I traded the 5 cyl Colorado at 20K for a used 2001 Dakota with a V6 and 5 speed. My Dakota has much more of a solid feel to it but it's much heavier and has less hp with a 170hp V6. I've done a few things to speed it up and it runs perfectly fine for me. I get about 22 MPG around town and 25 on the highway, a little better when I can use the cruise. And the interior is nicer too. I also like having a full gauge cluster on the dash. The Colorado's only had a temperature gauge. The Dodge 3.9 is a good reliable engine that I don't need a degree from MIT to work on.
Your friend can take a look at http://www.coloradofans.com
to find out a lot more about the Colorado and read the "common issues" page. All in all, mine were pretty good little trucks. I worked for a GM contractor at the time so I got good prices on both of mine. I would say get the extended cab or 4 door though. There's not enough room in the reg. cab IMHO.