There is a special vinyl-siding paint around. Extra sticky, extra stretchy. I agree with you though, it's a dumb concept. Kind of like getting out the tremclad and paintint the wheels on your car. You CAN do it.. but .... yuck. Anything that scratches the siding will leave a nice blue line, anypart of the siding that wasn't surgically clean can give you a nice paint blister. If it gets real cold, the paint may just fall off.
Other than that, your neighbour has a great idea. Tell him he should paint his siding, then cover that with cedar to REALLY protect it.