Why don't you call her on it?

My Dad lies a lot, and sometimes even starts to believe his own lying. I call him on it, but it often doesn't do a lot of good. He's been like that most of his life. My siblings and I talk about it, but we just have to let it go. I wonder if it is your friend with the issue, rather than her actually thinking she's doing something to "manipulate a mentally ill person". Either way, you may want to talk to her about this. Neither you, nor her son (with the multiple dxs) are children. Neither you, nor her son deserve to be manipulated like one.