Maybe it's a phase. My nephew used to collect soaps and kept a little bean doll in a matchbox. he is married with his own child now. My 10 year old son loves anything sparkly and glittery - he is a worry! We both agree that we couldn't care less if any of our children were gay, but would struggle of they were camp.
If it is a phase it's been going on for a long time. He found some pink flashing bunny ears in Blackpool. They, along with my floaty scarfs have kept him amused for the past week.
I'm afraid that your friend is buidling up real trouble for herself but not taking control - just whose house is it, anyway? The parents are going to haev to take a leaf out of Supernanny's book and start punishing for this dreadful and unacceptable behaviour. If the boys do it when they are 6 and 4, I dread to this how disrespectful and out of hand they will be in ten years' time. Your friend's not helping them by setting no boundaries.