D.K.
Hi, I do home child care and have for three years. I have had my share of kids that were a handful. I had one boy that cussed, spit, pushed other kids and stole toys! I confronted the parents, they were on board with time time outs but at home let him get away with whatever he wanted. When the behavior didn't change I just let them know I could not watch him anymore and gave them notice. You have to put your son first, other kids you watch first. If it is disruptive to you or your family it isn't worth it.
Now in school and older I hear the boy I watched has outgrown some of the bad behaviors, but to be honest if the parents don't do anything at home about it what can you do?
Now the boys I watch are great for me, they know the boundaries, rules and I run a tight structured ship. I allow five toys out per child at my house, so the floor is not full of toys, nobody can get hurt and it lessens the chaos. They know when snacks are, meals are and know what they need to do before they leave in cleaning up what they got out. Maybe try making things very scheduled at your home so he knows that to expect. You have the right to call him out on bad behavior and put him in time out when it occurs. I get to the level of the boys I watch and look them in the eyes and explain "you doing this is not okay, (then give the reason) then set them in time out for three to five minutes. If it takes twenty times so be it. I can say that rarely have I had to do this. It may just take some serious consequences for him to get you are in charge.
If you are friends with this woman, you can just tell her you would like to open up your home to other children and with his behavior requiring so much extra work you can no longer watch him. A friend would understand. She obviously is very aware and maybe suggesting him in a more structured daycare center would be better for him. Don't feel badly as you have to look out for you and your family first, she should understand that. Her simply not caring or reenforcing things at home he will not change anytime soon. She has to take charge. Kids get kicked out of daycares for the same reasons.
Good luck! :)