According to the manual, the 650i will run SLI just fine with both boards at x8. I've seen some benchmarks on the difference between the x8/x8 and x16/x16, and the difference is surprisingly small in most cases. For DX10, though - who knows...
If you run the two cards separately (to run 3-4 monitors), one runs at x16 and the other at x8. That's probably what your friend is thinking of.
So two 8800GTS in SLI mode will run fine in the P5N-E, but would run slightly better in a 680i/680i LT motherboard.