If you get asked by people and agree to read their work, you don't want to be labeled a prick, so take the high road. Give them the dead honest truth, but always explain it in detail why it doesn't fit/make sense, remember this work is their baby and they're very protective of it as we are of our own work.
If they ask you to correct it or edit, at that point you should have a written contact drawn up so it clearly states you worked on that project. Of course there are numerous times where you'll do stuff for free because it's a close friend, ect. In closing if a fellow writer comes to you asking for help and you have the time, please by all means help them. But never lead a writer astray by leaving them in limbo by never looking at their work, that's bad for business.