I feel your pain!!
My oldest friend was turning into someone that I would not have chosen as a friend had I met her now---Does that make sense??
Although she had grown up with alchoholic parents, and had really hated it, she started drinking, and then drinking heavily. If I mentioned anything about it-I was the enemy. It was a mess. Her marriage was really getting ugly--she and her husband only communicated through email (!!!).
I was trying to figure out whether to try an intervention, end the friendship, or what...
Then, she called me on the phone, demanded I go with her husband to his psycologist because the husband was claiming I was making odd faces at him (!!!). When I declined, she dropped me!
I was shocked, but then I realized that I had been given a free pass on having to deal with any more crazy.
So, I don't have any advice about how to drop a friend, but I sure know that a friendship can get to that point.
Good luck,
Cathy