Your co-worker is right. You cannot use the impersonal pronoun in this construction. "It" is used as an impersonal subject of the verb "be", especially to refer to time, distance, weather or in identity constructions.
e.g. It was a nice day yesterday.
It is 3 o`clock p.m.
It is a long distance to the nearest town.
This is my dog ;it[my dog] is happy now though it has been sick this morning.
For further details regarding the use of impersonal "it" see :
to be happy to see a person:
I am happy to see my grandfather, or
You / we/they are happy....
He/She/It is happy to see....
but [as your co-worker told you ] you can say :
It is fun/enjoyable to see somebody, etc.
She is full of fun./ I am full of fun etc. or,
A picnic would be fun.
Hope you understand the use of "it"