I have no problem heaping encouragement on any aspiring writer, friend or otherwise. It's not couched in the same terms if we're longtime close friends versus new acquaintances. I try to be sensitive to the pro/newbie imbalance in experience and hence, the authoritativeness with which opinions are delivered and received. Usually, I feel my way through whether my friend wants career advice, peer-level chats about craft and community, or simple acknowledgment of what they've done. I've misstepped enough times in the past to be aware that just because a friend asks me to look at her story does not automatically mean she wants a no-holds-barred critique.
Most of the time, if I like a person's writing, I'll like that person as a friend (even if I am a bit intimidated at first). Less of the time, if I like a person, I will like their writing. It's wonderful when the two coincide, but they don't always. With a friend-writer who's been around for a while, I feel freer to say, "Not my cup of tea," and we both understand what I mean. Different styles and stories appeal to different readers, and different flaws drive different readers nuts.
Then there's the situation when a friend, someone I know personally, asks me to review a book. Sometimes I might not otherwise have picked up the book and I love it. Or even if I think it's got problems, I can find intelligent things to say about it, so that perhaps someone who will love it will pick it up. Sometimes there's a good reason in terms of my own taste that I have not felt drawn to this book. Sometimes I start reading...and wince.
That's where the discernment comes around again. Is this a manuscript or a published book? If it's a published book, is the author wanting insight into why it isn't selling? (Or if it's selling like hotcakes, is this ain invitation to celebrate together?
I think this situation calls not only for discretion but for tenderness. In order for my response to be meaningful, I have to be free to say, "No, I can't in all honesty do what you ask." But I have to do it with kindness. For me, that means acknowledging the effort and the achievement, and perhaps doing a little gentle education that not even the finest book works for every reader. When I'm firmly in "editor/critiquer" mode, I can and do indulge in emphatic opinions. I can lose track of the limitations of my own point of view. This situation invites me to consider that I am not the One True Judge of everything literary or even of the science fiction and fantasy genres.
"Thank you for asking me, but I'm not the right reader to review your book" sounds to me a whole lot better than, "This is so awful, I can't think of anything good to say about it without lying." Or worse yet, to concoct something meaningless and without integrity, thereby making my own positive reviews of books I truly loved hollow and untrustworthy.