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Badpenny, your mental description (camoflauge, ducking when passerbys go by, etc....) paints a picture of a guy who's "up to no good". But .... here's other possibilities: a lot of us where camo. when detecting (there was even a recent thread on that), and doesn't mean someone is/was sneaking around. And as for ducking when cars pass by, that certainly sounds incriminating, but I can think of some parks or places I've gone where I too don't want to attract lookie-lous. Not that it's off-limits, but just so as not to have anyone start the "20 questions". Heck, I know a guy who .... if he's got a good beach erosion spot, will hide from other md'rs, go at night, etc.. If someone comes down the beach, he "ducks". Why? So no one wises up to his good spot. Nothing at all to do with legality (the beach he's at was perfectly open to detecting).
I know that series of potentials is not likely, given the steps you spell out. but just saying, that lack of wearing neon orange, and someone hunting at discreet times and avoiding lookie-lous, does not automatically equate to "up to no good".
So do you know your friend granted no one else permission? Is the house-site abandoned? Posted? Fenced? And the adjacent woods: are they public, or also the property of your friends? There has also been posts about random abandoned ruins in forests (where there's nothing to stop someone from walking by, which, for example, your wife and you also were walking by said-"old-home-site" as well, yet ... perhaps you were on the "other" side of a fence or sign?).
Yes, I know, the long list of potentials to make this md'r "smell like an angel" isn't likely, but .... just saying that some of the things *could* have an explanation.
If it were a public site, I would not report that to authorities. Because as much as I may not like it, the end result of calling the authorities does much worse for the hobby. It makes the hobby a big-red "x" in need of more scrutiny. Ends up in newspapers for archies to see, etc...., and cops to have a "BOL" mental picture, for when they see an md'r in the future, even if nothing at all is askew at other places. But since this is not a public site, and it's a personal friend of yours, then I would not have a problem with telling a personal friend. But actually, if I saw someone detecting, (like when you were walking by with your wife), I'd have probably walked right up to him, see what he's found, checked to see if he had permission, and so forth. Or perhaps he was too far away? Or you didn't want to 'cuz your wife was with you?