You are right to be concerned. Something is amiss in this situation. Without seeing this family, I can only make a few guesses. See if any of them make sense to you.
Possibility one: In some cases, when there is an age difference like this, the older child resents the birth of the younger one and does everything she (or in other cases, he) can to make it clear that the baby is just that — a baby. Not wanting the new baby to be a competitor, the older child copies adult behavior and “babies” the younger one as a way to demonstrate superiority.
Possibility two: The older child has discovered that she gets attention for treating the younger child like this. If she is attention-starved, she will do whatever it takes to get noticed. She may be getting positive attention from some adults for being a good “little mother.” Or she may be getting negative attention from adults for being overbearing. Either way, she is getting the attention she needs and craves.
Possibility three: The older child has been inappropriately touched by someone older than she is and is telling the adults around her in the only way she can. By acting out what was done to her on the younger child, she is sending a message that she has been abused or she is simply repeating what was done to her, thinking that it is normal.
Possibility four: Something else.
Whatever the reason, this middle child needs something. You didn’t mention your relationship to the friend. I’m guessing by your age that you are 20 or more years older than she is. Sometimes people will listen to their elders if they are spoken to with compassion and concern and caring. Another possibility would be to try to enlist someone else your friend cares about to help you talk with her. Be cautious with this approach, though. You don’t want her to feel ganged up on. That will only make her defensive. One other option is to explain to her that you were so concerned that you wrote to us here at PsychCentral and show her this response.
Please do remember that my guesses may not be true. They are just offered as possibilities to think about. Whatever the reason for her behavior, the 10 year old needs some kind of help.
I wish you all well.