My husband is a diabetic, and he eats everything the rest of us eat! The trick is portions of starches need to be known so they can give themselves enough insulin to cover the carbohydrates. This is for a type 1 diabetic; type 2s (usually due to being overweight, "older' and/or family history) may or may not have the same requirements.
My advice is this: serve starches seperately from the other stuff. Pot roast with potatoes, soup and bread, stir fry with rice.. you get the idea. Things with noodles added in or dumplings, etc, are a little harder to guage when it comes to deciding how much carbohydrate one is eating. If the starch is seperate, they can guage easily how much they put on their plate.
As for desert, I would make whatever you planned and let them decide if they want it or not. Stuff that is low sugar, etc, from the store is not good on sugar levels, ironically enough, as the carbs are just of a different type and it can be hard to tell how they'll react in the body. Most people with special diets would rather have a small peice of something yummy then a lot of something substandard, and a good friend will be thankful for something homemade no matter what!!
Vicki