Pboy,
Man, do I feel your pain! When they're sober, you must absolutely sit down with them and set out some rules:
1. They come to the studio sober.
2. They come to the studio PREPARED. None of this 'gimme a pen and paper' crap.
3. If it seems like they haven't practiced or at least have an idea about what their raps should sound like over a beat, stop the session and send them home. If you don't do this at the beginning of the session, you will have commited yourself to recording crap for 3 hours...you will then spend possibly dozens of hours later on editing everything in software to get words and phrases to match up with the beats.
4. No distractions. This includes: their 'homies', girlfriends, cell phones.
These are the rules in my studio, and while it may make me unpopular initially, the ones who are really serious about getting work done respect that; the rest go home crying and talk smack about me, but I could care less. You job as an engineer/producer/whatever is not to be popular, but to record. I had to learn the hard way, and now that these rules are set everyone is a much happier person.
Explain to them that your time is valuable and your job is to record, not babysit. If they give you grief, show them this post.
It's ok to make modifications to lyrics when recording, but it's not ok to write them out while you're sitting there twiddling your thumbs. This goes for recording ANYTHING. Your job is to capture a performance and see to it that you get the best one possible.
I recently recorded a small jazz combo, all the musicians were professional in every sense of the word. They came sober, they knew their songs, and we managed to lay down all the parts for a sax, trumpet, piano and vocals for 8 short songs in about 3 hours. The only time we weren't recording was when I was patching the mixer, setting levels and placing the mics. It was such a dream session: great performances and great recording in a short amount of time.
This was such a contrast to recording amateur rappers who basically were so damn cocky that they though they could 'spit' anything over any beat...what usually happens is their rhymes don't follow the structure of the song and they don't have any idea how to place phrases properly with the beat. It is SO damn annoying.
The last thing is to be honest with your friends. Just because they know you doesn't give them the right to assume that they will automatically have access to your time and gear, ESPECIALLY if they suck. It's cool to have a few friends over to mess around, maybe they just want to try recording out or want to see what it is you do, and this is where being a friend comes into play...
Good luck in the future!
Nick