Would you use a friend's name for your child or is it too weird because you associate the name with that friend already?
This isn't in a scenario where you want to honor that friend in any way, you simply like the name. But there's also the possible effect that the friend in question will feel like you are "honoring" her, making things even more complicated.

Re: Using FRIEND's names (not their children)
~EDD Nov 18, 2017 with my IUI success story~
[spoiler]
I agree this is difficult and I do think it depends on how popular it is. For example, my husband has a good friend named Reo. I really like that name and would love to use it for a boy, but since it isn't very common I think it would be way too weird. However, if it was a name like Ryan or Joseph I don't think it would be a problem.
What is the name? If you give us that I think you might get more honest opinions.
This is difficult. I have a friend named Madeleine and this was one of the girl names that both my DH and I liked (there were only two other girl names we could agree on). I felt kind of weird, because I wasn't "honoring" her as you put it, it was jsut a name DH and I both liked. I don't think it would stop me from using it, although DH and like some other names better anyway.
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There is only one good solution to this problem:
Go to your friend and say "Hey, we were thinking. We both really like the name Elizabeth and were wondering if it would be weird for you if we used it for this little one's name."
That way, it sends the message that you are not naming DD after her, but you just like the name. AND the etiquette of it all is covered, because you are okaying it with your friend. There's practically no chance that she will say it would bother her, because she will be flattered that someone likes her name.