Yes, virtual is for in-country, physical for when out of country.
Each have their own delays and disadvantages/advantages. Physical: has to be sent in to visa application centre, delays (I understand) typically 2-4 weeks. Virtual: online but must be in country (or can return). I think typically not that much longer than physical BUT if IRCC thinks the applicant is out of country and you have to request virtual, the timeline gets unpredictable. YMMV.
In your/his case, as a US citizen, not perhaps a big deal - if he gets invitation to virtual, he can just come to Canada (and leave and depart as necessary). One caveat is an issue if he gets the 'you are now a PR' when out of country, becomes unclear when the applicant became a PR.
But otherwise with a US passport, he can come and go and doesn't have to wait for a visa, or even send in the passport. He can have it returned to US address, go down and get the docs, and return the next day. If he's close to border on both sides, maybe that's easier. But I can't say for sure.
I'm reluctant to say which is better though becuase it's hard to keep track of actual timelines/there's some randomness.
Probably only solid advice I can give is 'pick a lane.' Change address now (when he next comes to Canada) or not, stick with it. IRCc change-of-address system seems inconsistent.