What you are describing is SVO, and takes modifications to the fuel delivery system to work.
Homemade biodiesel is a different thing, cooked out of the SVO in a long heating and mixing process to get the glycerin out of the fuel using methanol.
I agree your friend is not doing things right and the problems you are finding, but that does not mean properly processed homemade biodiesel is all bad.
You need the equipment and process to do it right.
http://m.youtube.com/watch?v=O9MtCMebBHo
These homemade units and methanol isn't always safe, but it is an interesting process.
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