3.0.8 will not work when connecting to anything below a 3.0.8 Mangos/ArcEmu server.
You will need to downgrade to 3.0.3.
Also, if that doesn't work. Try using the IP your friend is connecting from.
P.S: Btw, all you need is "Set Realmlist 127.0.0.1" the rest is useless.