I would begin to keep some distance from her and when she asks why you are not as available, maybe mention that your son really has a hard time being around her child due to the different ways that you both raise kids. You are not being over protective. I have been in this same situation with a friend of mine. She continued to raise her daughter in the same way your friend did, and I was more like you. I do not believe in letting a child act up and run all around the store etc...Your friend needs to learn to parent. She has lost control, and is so far gone, she blocks it out. I hope you either continue to be friends, and ask your friend if she doesn't mind if you can help with hers (actually sit his butt down or to support you when you tell them to do or not to do something), which you shouldn't have to, but if you want that friendship, you will have to make up for the lack of parenting for her.
What is most important here is that your child not feel tormented. My daughter, who was in the same place as your child, understood that mommy was going to maintain control of her, adn that I absolutely did not agree with how the friend parented. We had our little talk before we met up with them, so she was told that if the other kid ran around, that she was not going to able to, and to ignore the other kid. Let yours know that that behavior is unacceptable, and that it isn't what is best for that kid either.
***As long as you and yours stay connected, continuously communicate (between your family) about how you and your child know it is wrong, it will be okay.
**If you feel that your childs behavior is turning toward the other kids, you need to have a talk with your friend and explain it to her....but do not compromise your child and husband's happiness.
That friend of mine and I are no longer friends because of how we were different that way. The thing is it wasn't just with her kid. The attitude she had that allowed her kid to run wild, showed other unfavorable qualities that turned out to make our family miserable. So we went our seperate ways, and are SOOO much happier...no undue stress...no having to grit my teeth...
Sorry for blabbermouthing....I just had a second to respond, and no time to edit or collect my thoughts. Hope I helped though....good luck.
A.