I've never been in exactly the same situation as you, but I have lent money to friends and it has always turned out badly. Except for one person, I haven't been paid back most of it and the folks who borrowed the money have disappeared into the night.
The only thing I can say (from an outsider looking in) is that you're probably being a better friend to the "bad friend" by getting her to take responsibility for her actions, than letting her get away with it. Maybe it'll help turn her life around so that she doesn't do this to other people.
It sure sucks, though....
