The problem seems to be that there is supposedly a period of future earthly (historical, pre judgement) blessings promised to Israel. These do not seem to have occurred.
Let me suggest several ways that this could be construed.
a. like your friend, one could hold that Israel is not the church, in which case one could either argue that:
1. The prophecies of blessing were wrong 2. Israel recieved the prophecies of earthly blessing (in the OT) 3. The prophesies of earthly blessing were really symbolic prophecies of spiritual realities either: I). Already occuring in the OT II). To occur later than the propesies but before the end of Israel. III).To occur to dead Israelites, in heaven, before the judgement. IV). To only be realised after the judgement and the end of the world 4. The prophesies were conditional, and Israel forfeited them. 5. the promises of Earthly blessing were trew, and Israel will in the future return to existence and be blessed with the things promised.
b. One could instead argue that the church is Israel, as Reformed Thinkers tend to, particularly based on the NT references to the Abrahamic Covenant, as well as several arguments previously listed. In this case one could either argue that:
1. The prophecies of blessing were wrong 2. Israel received the prophecies of earthly blessing (in the OT). 3. Israel/the church received the earthly blessing (in the NT or shortly afterwards) 4. The prophesies of earthly blessing were really symbolic prophecies of spiritual realities either: I). Already occuring in the OT/NT/all of history II). To occur in the NT church (ie symbolic language for the reality of the New Covenant). III). To occur in the NT church (ie symbolic language for general blessings that Christians receive, but the actual historical blessings don't match the form of language they are portrayed in, which was 'apocalyptic' language). III).To occur to dead believers, in heaven, before the judgement. IV). To only be realised after the judgement and the end of the world 5. The prophesies were conditional, and the Church forfeited them. 6. the promises of Earthly blessing were trew, and the Church will receive these Earthly blessings in the future before the judgement.
We should also note that not all prophecies have to be interpreted in the same manner. some may be symbolic or figurative and others not. Some literal promises may already be fulfilled and others not.
In regards to seeming promises of the rule of Christ over nations, and all nations serving the church, one could either argue that this is figurative, or to be realised in heaven, views generally considered Amil, or one can argue that it is a literal prophecy about future history before the judgement, in which case one is asked if the blessings accrue to an Israel that is the Church (Postmill) or to an Israel that is not the Church (Dispie and Premill).
Most Reformed Theologians have either been Amil or Postmill. Whilst the Westminster Assembly seems to have been Postmill (cf larger cat) most current Reformed scholars are Amil. I am a Postie, and take the promises of the nations covenanting to Christ literally, but many good Reformed men take both sides of the issue.
Premil dispies seem to particularly struggle in the fact that they posit that Christ's reign must be a bodily reign, and so is not occurring now. As such he must return before the judgement to rule on earth for the thousand years. This struggles with the facts that the reign of Prince Messiah in OT prophecy is linked to his exaltation that began at the start of the new covenant, and linked to his present kingdom which is the church, and seems to thus run for the whole New Covenant era.
The mediatorial reign of Christ is the reign so often linked in with the earthly ruling of the worshipping nations your friend believes in, and this reign is continuously depicted as a heavenly session at the father's right hand, and not being a mere earthly potentate on a grubby throne over an exclusively ethnic nation. It is a reign over and in the church, not merely the church triumphant but the church militant, a reign that is continously identified with OT prophecy and explicitly stated as beginning in the NT era, not in some future coming before the end posited for mere systemic purposes in the face of contrary verses. This reign is seen as a reign fulfilling those OT promises of historical blessing, in history, before the end, when the reign ceases and Christ hands over his kingdom to the father, a reign in which the effects of the curse are gradually defeated, wars cease, and the nations one by one come unto Jerusalem and worship the Lord by her light. The mediatorial reign begins with the exaltation of Christ, is the basis of the destruction of sin in history, and ends at the judgement (so much for 'now and not yet', which posits that the messianic blessings of the messianic reign are largely confined to a period after the messianic (Davidic) reign, ie, post-judgement heaven). It is this reign and this exaltation that are so regularly linked with the OT promises of earthly blessing and national conversion. If your friend quotes promises to you, at times you agree with their historical nature, but point out their link to the exaltation of Christ and his current messianic reign that is the exaltation of the Servant of the Lord for his obedience. It is not mere blessings that are promised, but blessings from the messiah, and it is not blessings apart from the present reign, but during it and because of it.
Dispie theo seperates the office of the mediator (exulted) from the blessing he gives, and insists that the blessings only be linked with the Davidic rule. I would suggest that the Messiah's rule, currently, is the Davidic rule, which is at least the basis of his office as king; Davidic rule is integral to messianic rule in my books, and doesn't occur in Christ apart from it.
In sum, ask your friend why he cannot really believe that the Son of Man is seated at the right hand of power until he defeats every enemy, why he cannot believe that the Son of Man will not come again until he comes in judgement at the end of the world, why he cannot believe that the messianic reign is now begun, why he cannot believe that Christ will come as a thief in the night, why he cannot believe the NT identification of the church with Israel, and why he cannot believe the NT applications of OT prophecy to both the current messianic reign and to that NT Church which Christ reigns in ... he has to answer "because of dispie theo". It is dispensationalism that fails to explain the prophecies, because the prophecies see Jesus Christ reigning over the gentiles in his Church (or kingdom), and blessing them with peace and conversion as a result of his obedient work.
Sorry for the long post, and the poor spelling, but the topic is glorious, and may you pass over my halting words to see the truth in Christ, and to behold the gories of His reign.