I have recently been looking to switch from 700r4 to a T5, my friend told me that if i do this i will lose torque because the TC multiplies it. Is he right? Also how strong are the T5's. And didn't ford also use the Borg Warner T5 in their mustangs with v8's, if so why didn't chevy use them?

OK, the best way to describe it is.....
Stall Torque Ratio:
The stall torque ratio is the amount of engine torque that the torque converter can multiply at a particular rpm level. By definition, stall torque ratio is when the turbine is at 0 RPMs and the converter is at maximum designed stall. This will produce a positive push on the turbine to increase the torque to the input shaft of the transmission, multiplied by the designed stall torque ratio of the torque converter. For example, a stall torque ratio of 2.0 would multiply 200 lb. ft. of engine torque to 400 lb. ft. of torque at the transmission input-shaft.

So...yes a torque converter is a "torque multiplier".

A mechanical clutch transmits torque via surface friction between the faces of the clutch disc, the flywheel, and pressure plate.
The clutch is used to control the amount of torque applied to the transmission input shaft. Since the clutch is a direct link between the engine and the transmission there are no multipliers at work here so in a manner of speaking you do "lose" some torque. BUT, there's good news in that because what you lose in torque you gain back in horsepower and since horsepower is a measure of work being done that means that you are moving quicker than the guy with the automatic.
Energy or work/ time = power. Work is force X distance. So power is force X distance divided by time.
There is much more to it than this and you will get debates until the end of time as to which is better, automatic or manual. The truth is....which ever YOU are happy with is the best.

As an addition: The TC only multiplies torque in a limited rpm range. Basically off the line. Use the T-5.

A) The T-5 is not the strongest Tranny. Hang onto your 700 just in case.

B) Yes you would lose torque miltiplication IF all things were equal but you have to take into account the gear ratio in 1st on the T-5 and combine it with the rear axle ratio. Compare this to the 700's 3.06 1st gear and axle.

Trans, your "B" makes no sense. My T-5, which I ran the times in my sig with, had a first gear of about 3. Just like the 700. On a 700 with a decent torque converter with a multiplication ratio of 2 you could have twice the torque off the line as the stick. (at the same rpm and negating frictional losses) Notice, how it is "off the line."

"you have to take into account the gear ratio in 1st on the T-5"

I do NOT claim to be a standard guy, therefore I do NOT know what the ratio is in the T-5, hense the above quote. I was trying to show how the comparison would have to be made, not making a claim as to what WOULD happen.