I would say, if the kick comes from the hip and the knee REACTS TO THE WATER, I don't think there will be an increase in drag (from lower leg bend) and lever is full leg as the knee snaps. That seems to give the best of both worlds (low drag and slight propulsion). The key, in my mind, is that the knee bends because the knee moves forward slightly before the foot does during the forward beat (this is what I mean by reacts to the water).
I think it would be really difficult for most swimmers to keep their legs stiff and their movement fluid. I see many beginners that are too mechanical.
I think most swimmers would put too much energy into stiffening their legs if "stiff" was the goal. "Tone", to me, says held with as little energy as possible. It is more economical.
So, with all due respect to Emmett Hines, I have to side with Terry on this one. I do, however, think this is an argument of of words only. I would think that Emmett intends his swimmers to use as little energy as possible to keep the legs stiff.