I think that it probably was "all for phone sex." I get the same way- do and say weird things when I get caught in the moment, and then later I'll go, what the hell was I thinking? Point is, I wasn't.
I think the thought of doing something, as great as it sounds, is usually a lot better than the actual doing. For some people that's not true, but for me it is, cause yeah, you get stuck with the afterthoughts.
I think it's cool that he'll get down and dirty with you like that over the phone, some guys just wouldn't. Him talking about your friend that he's never met sounds harmless actually. It was probably just the first person he could think of. (And also- awesome that he didn't freak out over your threesome idea. Some guys would just be sooo turned off by that.)
Honestly? I don't think he crossed a line. He could have just as easily been talking about Angelina Jolie- another woman that he's never met. If you like him, and miss him, I'd definitely show him a little mercy.