He thinks I should sell outright and look for another deal or at the minimum remove duplex status (which I could never get back) by removing half the firewall and one kitchen for the addition of another bedroom.. thus adding another room to rent.

Personally, I would keep a firewall between wholesaling activities and brokerage activities. 

Here is what I would ask the seller to do/adjust the selling price for.Repair firewall between two units (this is usually set by local code that you must have a fire wall between the two units in case one catches on fire, the fire will not move through the attic space and catch both units on fire as quickly)Get a roofer to come out and do a full inspection and provide a quote for repairs... sagging roof and leaking roof penetrations can become a big issue.Have a electrician come out and provide a quote to secure wiring in electric box and a new breaker cover.

Have a "firewall" (fire retardant drywall) all the way up between the units.2.

This is my most investors seem to choose to set up additional LLCs later as they grow, so they create firewalls between their assets: if one burns down they don't loose the other ones.PS: this reflects my personal findings - I am not a lawyer and not your advisor.

The units were side-by-side with a firewall in between them. 

That means most likely, a fire wall dividing the two units, all the way up to the roof.

They typically have requirements like firewalls to install, what constitutes a kitchen, etc.

Like Matthew pointed out you would likely want to consult a local attorney, but in my area there is little to no downside and increased anonymity and firewall effect by utilizing that strategy.

They should be acting a conduit and not a firewall between buyer and seller regardless of the commission incentive.