Responsive Sites?

No offense, but what you don't know about modern site development would fill volumes.  Dreamweaver CC is a good tool, yes.  But it's only as good as the person using it.   If you don't know what you're doing, Dreamweaver CC can't make you a rock star. 

Unless you have a lot of time to devote to learning what you don't know, it's not practical to do this yourself without a framework.  Tell your friend it's time to re-build the site in WordPress, Webflow, Wix or some other online site builder that you're both comfortable using.

1. Does the current version of DW really create responsive sites?

It has the ability to create responsive websites but it wont do it for you. By default newer versions of Dreamweaver use the Bootstrap front-end framework to assist developers in creating responsive websites. However you dont need the lastest version of Dreamweaver to use Bootstrap as its an open source framework. You could just go to the Bootstrap website and link to the framework files using the CDN links provided and cut and paste the Bootstrap components, any web-editor can be used to do this. Once you have Bootstrap linked to your page you then need to take some time learning how it works. There are plenty of videos on youtube.

2. How difficult is this to do?

Like anything it requires some knowledge, so for a beginner produicing a responsive website it will be difficult, long and very frustrating.

3. How realistic is it to assume that I could could convert this dinosaur to a responsive site using the latest version of DW?

Totally unrealistic. The web has changes beyond recognition since 2001. You need to start from scratch.

Of course you dont have to use Bootstrap at all, you could code your own responsive website. Again there are plenty of videos on youtube, its a lot easier than it used to be, no need for front-end frameworks at all these days.