Wow, that is a good story. Great lesson for you that everything can seem fine and in an instant you have no reg in your mouth and then an instant later another regulator that does not work (since you didn't understand how it works). Probably should make sure you know how your buddy's gear works.
Also, If I get a bad freeflow, I would try to stop it, but if that does not work immediately I plan on switching to an alternate second stage, get the ascent started and then switch back to the freeflow, once I feel more in control. I would not consider the decision to temporarily stop using the freeflowing regulator a "panic", but the OP probably knows if he was feeling panic or not.
I think the general advice is to just keep using the freeflowing reg, but it is so hard to see, so distracting and noisy and it is bouncing your head around, that it can really be a meaningful distraction. I'm not sure I have ever had a really bad freeflow at depth (yet). I guess if I were deep and the air was tight, I might try to use the alternate and kink the primary hose to slow the freeflow. I wouldn't practice that since I assume it would damage the hose.