I have a guy who wants to set up a defined benefit plan for himself, contribute to it, and immediately turn around and take a loan out from the plan.

Is this legal?

How do loans from DB plans work?

Same as in DC plans (i.e., capped to lesser of 50k and 50% of vested account balance - in this case present value of vested accrued benefit). You will need to focus on this to determine how much can be pulled out as loan. Repayment terms are identical.

Except, as I understand it, the plan administrator cannot foreclose on it without the occurence of a distributable event, because that would be tantamount to a prohibited in-service distribution.

This is why loans in DB plans are rare. The contingency rules are messy.

I believe that the prohibition against foreclosing < a distributable event also applies to 401K money.