No, I am not laughing either, especially since I am flying tomorrow, on a long haul. I re-read your post and saw that this took place in August.
If this happened yesterday, these would have been my thoughts:
I am sure that you and your friends are "good people", but the security guard used bad judgement in "making an exception"...he should have taken the knife from your friend (sorry.... It's not personal) , because say your friend took it out while the plane was inflight? The knife could have been wrested from your friend by some
lunatic on the plane, used it against you guys and then who knows what could have happened?
When I fly tomorrow, I will let you know if there is a knife on my meal tray or not....so much for "security".