"Mi amigo estuvo bebiendo cerveza todo el día."
Translation:My friend was drinking beer all day.
This is a good question. The way I understand it, the preterite is used for an action that happened once and/or is completed, and the imperfect for when the action was ongoing in the past. So the target sentence is preterite progressive as he was drinking beer all day on a particular day.
Your example number 1 is imperfect progressive so you could use it in the sense that he used to be drinking beer all day, every day, during some period in the past. For example "When I visited him, my friend would be drinking beer all day" would use estaba in Spanish, plus the progressive because he was doing it at the time I visited him.
Your example number 2 is imperfect without the progressive, so it is not a single action. For example "Throughout the summer of 1976, my friend used to drink beer all day".
The difference is quite subtle, and in English we might drop in the gerund with no difference in meaning: yesterday he drank beer all day/yesterday he was drinking beer all day.
I'm calling a foul on the owl! Since this whole section has been using the present participle, I knew that what was needed here was ""bebiendo." I had this is a choose the correct word exercise, but "bebiendo" was not an option! I'm using a browser on a tablet. This happened on Jul 8, 2017 and I reported it.
I would say that depending on context it could be imperfect. iakobski wrote a great explanation of what it would mean in either imperfect or imperfect progressive. If you just want to say that, on a specific occasion, on a day in the past which has been established, your friend was drinking beer all day; then you should use preterite.
My friend is an alcoholic. He quit drinking after he was too drunk to get out of the house and come to my wedding. While we were celebrating, my friend was drinking beer all day.
Mi amigo es un alcohólico. Él dejó de beber después de que estuvo demasiado borracho para salir de la casa y venir a mi boda. Mientras estuvimos celebrando, mi amigo estuvo bebiendo cerveza todo el día.