Not the parent, but: a staffing agency typically handles lots of administrative stuff for its workers. They handle billing the client, they make sure taxes are withheld and give you the documentation you need at tax time, they may provide group benefits like health insurance. They also provide the legal entity the client contracts with, so the workers don't all have to incorporate individually. This is the ongoing value they add, they shield their workers from all the messy and complicated hassles that come with entrepreneurship.

If the idea is you're an independent contractor who's still expected to handle all that stuff yourself, your friend isn't acting as a staffing agency. They're just bringing you on as a subcontractor.

As to whether the amount they're asking for is reasonable, anything's reasonable if all the parties involved agree that it is. It sounds like you don't, and are looking for some justification you can hang that objection off of. But you don't need a justification, you're two parties trying to strike a deal, it's perfectly within your rights to say "I think this deal sucks" and make a counter-offer you like better or even walk away. That may not be smart, depending on how badly you need this work -- remember though, he needs you to make this deal happen as much as you need him! -- but it's absolutely something you can do.