I'm unclear as why you think you need conduit.

You should not be running ROMEX inside the conduit. No you CAN NOT just strip the sheath off the NM. If you're going to use conduit, get appropriate single conductors.

1/2" EMT will be fine for up to 5 #10. You may find it easier to go up to 3/4 just to making pulling easier but it's not required.

As near as I know, New Jersey follows the 2011 without any significant modification so 1/2 would be legal.

The argument probably stems from the issue of using the 10/3 romex. It won't fit inside a 1/2" conduit with any sort of bends or distance. His friend was trying to tell him it will fit better in 3/4" when in fact it shouldn't be used inside conduit at all. Use thhn individual conductors inside the conduit if you feel you need conduit. Make joints inside and accessable j-box and convert to romex in the basement.

NM-B (Romex) needs to be installed so it isn't "subject to damage". Most AHJs (building officials) consider anything under 4 feet off the floor in a garage subject to damage if not in a finished wall.

NEC 334.15 (B) specifically permits EMT to be used for this. The EMT shouldn't be used as a "system", meaning the NM-B both enters and leaves the EMT in a fashion that the EMT is used as a sleeve. The EMT shouldn't have boxes on both ends of the run so it is considered a "complete" conduit run.

The installation the OP describes isn't unusual and becomes a problem only if the EMT terminates in the panel or boxes (because of clamping requirements). If the EMT is on a basement wall the rules change slightly.

Uncle Bill is correct.