I wouldn't sit her down, after all...(think of her words to you) you have only known her for 2 years and what do you know about her life and her kids, and what right do you have. And ETC. ETC. I would just start backing off, if she calls, you can volunteer to have the child DROPPED off at your house (sorry, friend, a lot going on and I can only have one child over and no extra company), that way, you can monitor the situation better, and be a good role model to the kid who doesn't seem to be the issue. If you really miss her at a friend, you can meet out alone for coffee or drinks, or not....but I don't see a lot vested in this relationship anyway. But stay respectful, since you'll probably keep running into her through the years, and hope for the best.