So here's a kiddie pool analogy that I think might be a little more closely related to reality: Fill a kiddie pool with water. Simulate the rebound by pushing the underside of the pool so that it sticks up out of the water. Now, I predict that the water level in the pool will be quite a bit higher because that "island" we've created will displace so much water. I also predict that higher we push this "island" up out of the water, the more it will displace.
Possibly G_L's friend should actually be arguing that the rebound will be extremely slow, since it sounds to me like a whole continent lifting higher out of the water should have the opposite effect of what was claimed.
As for causes of the rebound, the link I posted a while back suggests that the sinking is due to deformation of the lithosphere. Evidence for this includes that as Scandanavia rises the Netherlands is sinking, which fits with the theory in that a region of the lithosphere pressing down should displace the asthenosphere, which will put some upward pressure on the lithosphere in the surrounding area.
While I'm sure packing of the strata happens, I would guess that it doesn't contribute much to the isostatic rebound for about the same reason that a canister of flour doesn't fluff itself.
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