Audio Friends Don't Let Audio Friends ...

Depends on a number of issues. If it's a good friend, with plenty of budget, and a top tier sound system, I'll say what I hear but I'll also ask what he/she thinks. . For someone with a lessor system I might say...Have you thought about maybe getting a (fill in the blank) or trying (fill in the blank). But if it's truly awful and just not different, yeah I'm going to say exactly that.  

DC,

Naturally I would have heard the "New Gear" in his system in order to have an opinion. 

I have made a point of visiting several people's home systems over the past year or so. Usually it sounds very good in some particular way but not always. Some really miss the mark even when these people had the funds to do it right.

One thing I have learned is the amount of money spent frequently has no relation to the quality of the sound.

Really kind of sad too. This is when I feel unsure what to say to the owners

If they are happy, then keep it to yourself, why deflate the bubble....

I would give my opinion if asked. If the person is unsure about his choice and is seeking validation in what others think then perhaps he needs to hear the painful truth. But if the person is enjoying his latest upgrade, why ruin it for him? Also, the choice of words would depend on how close of a friend the person is. My best audio buddy and I have polarized opinions on what type of amplification we prefer (among other things) but that doesn't stop us from supporting one another and enjoying each other's system.

The Truth shall set you free...