I know how frustrating it is to have dogs and to want to have a decent garden. The photo that you referred to seems to offer only a small space. I think something like that could lead to frustrated barking dogs but as a short term solution to reseeding and refurbishing the lawned area it might work out. What we ended up doing was to reduce the size of our lawned area which had gotten so beaten up, and increased the patio, deck, flower bed area. This has worked really well - the dogs still have the run of the garden but there is less to destroy and less muddy mess when it rains.
On the matter of the guy you know who keeps his dog in what sounds like in humane conditions, I echo the suggestion to report this to the ISPCA and I believe this can be done anonymously. They can send someone out to inspect a case of suspected cruelty - they might just need to speak to the owner about appropriate care or perhaps the dog needs to be removed and rehomed. I couldnt stop thinking about this when I read your post.