Sole employer has a SEP in place and has funded it for 2007, but is looking for other ways to shelter some additional money. His earnings in 06 were 1.4 mil and expected to be the same this year. I was told he can not fund the SEP if he establishes a DB, but I do not think that is accurate.

It depends. If he uses the IRS model SEP, then he can't contribute for both. If he is using a prototype SEP that permits it, then he could have both subject to normal combined plan deduction limits.