My son was 2 1/2 months when I placed him in an in-home daycare run by a relative of my husbands. Her daycare was fairly new and my son was her first and only baby. At first things went pretty well. Since he was on a mixture of breast milk and formula it was pretty easy. Once I switched my son to solids however (on Doctors recommendation) our opinions conflicted. Instead of following my instructions, she had me switch him back to baby food because it was easier for her to feed him that while watching the other children. She often complained that he was being "clingy" and once winter hit that his nose was running "constantly". He had several ear infections that winter as well. Each time one would hit, she would let me know that she wasn't pleased that the Dr's weren't doing something more permanent for him.
So anyway, I guess what I am saying is to make sure you and your friend are on the same page when it comes to parenting styles. (Or make certain you are willing to listen to her when it comes to her baby) And as someone else had mentioned, come up with a contract. List your fee and your policies regarding watching the child when their sick, your sick etc.