I believe that era of Morgan Classics had started using a heater box with permanently fed engine heat as per all such until end of production. The change of heater control took place at least as early as 2006 so similar to your friends car, the actual heat output being controlled by a pair of airbox flaps you describe allowing a chosen balance between heated and unheated air. The click detent control operates a crude gear wheel behind dash engaging with holes on a bellcrank in turn operating a bowden cable control to flaps. It can benefit from greasing of the gear wheel/bellcrank, maybe easing with a little oil first, to lighten operation.
