you have to put the needs of your child first.

If I were you, I would call your friend or set up a time to talk to her without the children present. Share with her honestly how much you value her and want to support her BUT her child cannot be allowed to hurt your child again.

Tell her that if she cannot impose the appropriate discipline but is OK with you taking on that role, you will do it so the kids can still play without anyone being injured. Then don't feel guilty for taking care of things.