I counted 614 dmg on your friend's gear (edit: meh, missed maybe 8 in gem slots). Then he gets 130 from talented fel armor. That's 744. In order to hit 1000 dmg his pet needs to have a combined stamina and int of 1707. I'm pretty sure that's not happening. Either he has a different gear set or doesn't realize some things are already added into his character sheet.
What sets him apart most from you is 1. he enchants his gear - 109 of his dmg comes from that and 2. he gets fel armor which is honestly overpowered as it's a big buff to damage as well as healing affects for recovering from life taps.
FYI, I have a lot more health and a fair amount more mana than you on top of beating you in +dmg on my paladin. I just don't have much +spell crit and +spell hit because good holy +dmg gear doesn't drop in instances. Probably because a holy paladin's primary responsibility is healing. I'd stack damage anyway as judgment of righteousness and holy shock are kind of expensive for grinding and on long cooldowns but rank 1 consecration after judged crusader does ~1K damage in 8 seconds and I get a decent amount of holy damage added per sword strike with seal of righteousness.
Thanks for the lesson on balance, though.
Paladin profile (I rarely solo though so it's always healing gear - you can see a few pieces of my dmg set, though like the chest, shoulders, and boots) -
http://armory.worldofwarcraft.com/#character-sheet.xml?r=Khaz+Modan&n=Esmi
Warlock profile (except for the wand and a crit trinket, it's all pre-expansion gear) -
http://armory.worldofwarcraft.com/#character-sheet.xml?r=Khaz+Modan&n=Serisen