“The idea is, if the batteries catch on fire, the fire will die because there won’t be any oxygen to sustain it.”
No disrespect to your friend, but this is not going to work. The battery contains all the chemicals necessary to hundreds of kilowatts of energy in the form of heat in a short period of time. Confine this in an airtight container and now you have a bomb instead of just a fire.
necessary to hundreds = necessary to supply hundreds
...Kind of like saying dynamite is safe if you put it in a strong box...