Problem

He has to have gotten it from somewhere, whether as a giftable copy or Steam key, to be able to give it to you

Ummm, this website doesn't make games appear by magic, somebody has to actually buy the game. So if you make a Skyrim giveaway for example, that doesn't mean steamgifts.com buys a Skyrim for someone, it means you buy a Skyrim for someone, and when the giveaway ends you have to give it to them. Good luck!

Of course he can gift without paying for the game.

Well, if he's already gotten the game in his library, he can't put it back in his inventory. In other words, if it shows up in his games list, he's going to need to buy it again. I don't quite understand what you mean by if he has to buy it first or gift without paying. There is an option to gift when you buy a game (Terraria).
EDIT: Saw that your problem was answered. Nevermind this.

Also, if you mark a gift as Received when you haven't actually received it, you can get suspended.
And if your friend is wondering why they didn't get any CV for their private giveaway to you, it's because you were the only entry. Private giveaways with only one entry don't earn any CV.

"facepalm"

Also, I remember you from the DayZ trolling Ga. Just keep your eyes open ;)