Some people have a specific weakness with exams, for example because they don't work well under time pressure. It sounds like the issue here isn't exams themselves, though, but rather your friend's approach (not learning what things are called, being unwilling to work on any exam questions except the most thought-provoking ones, etc.). As an advisor, this would worry me and I would want some evidence that it won't be a problem in other areas.
The problem is that a successful scientific research career requires more than just scientific ability. You have to be willing to do things that are necessary even if they aren't fun. (If you are sufficiently brilliant, you might be excused from doing things that are required of other people, but this is not something one can or should count on.) Some people have plenty of scientific ability but are not temperamentally suited for a research career and are not likely to be as successful as their ability suggests.
For example, you have to read other people's papers and cite them appropriately. You have to work out details carefully, rather than just giving an impressionistic account of the main ideas. You have to write down and publish your work, not just keep it in your head. You have to publish the papers you can write, rather than holding out for years waiting for the perfect paper you might someday be capable of.
Most people are fine with all these things, but some people just hit a psychological wall and can't bring themselves to do something. This is a major career impediment. It's not worth preparing someone for a career they are going to derail, so it's important to try to predict who can do what they need to and who can't.
To return to performance on exams, getting high scores is partly a demonstration of knowledge, but also partly a form of jumping through hoops. Hoop jumping is of no value in its own right, but it's a demonstration that you are willing to do what you have to do. When a student refuses to jump through hoops, I sort of admire the stubbornness, but at the same time I wonder what else the student will be unwilling to do.
Supportive letters are critical for grad school admission. You mention that your guide has a high opinion of your friend's work, which is a good sign. If your friend can find letter writers who make a compelling case for why he will be successful, then I expect many admissions committees will admit him despite the exam grades. Otherwise, getting admitted will prove difficult.