I definitely think that the little boy's jealous, especially if his mum smiles and makes nice comments about your baby. Perhaps he doesn't get that very much at home.
You must speak to your friend, though. It sounds as though she doesn't have the right sort of control over her son. Just by shouting at him, she's displaying signs of aggression herself, whereas a very firm "NO, you mustn't do that", and moving him our of reach your child, should teach him that what he's doing is wrong. Sadly, if she takes the hump, then despite 25 year's of friendship, your own child's welfare comes first. Tell her bluntly that this has to stop - and mean it. If your friend's a decent one, and receptive to what you're saying, you then might be able to suggest to her that she tackles her husband's bad behaviour as well. Best of luck.