They were very goods friends,who else could get Freddie to guest on a TV show? Listen to Freddie reading the weather on Youtube on Kenny's 1976 Capital radio show,really funny.And I fully believe that story when Princess Diana went to the Vauxhall tavern with these two dressed as a man in the eighties,she loved Kenny and was a huge fan of Queen.
I find the Lady Di story a bit hard to believe. It just sounds too fantastical to be true, and there's really no evidence that Freddie and Diana ever even met. They were at the same venue for Live Aid of course.
But can you imagine the huge risk she would have taken - going to a gay club dressed as a man, with Freddie Mercury? If the press found out, she'd have been toast. This was a long way away from her divorce from Charles.
I read once that Charles got fed up at Live Aid after an hour or so and left with Diana (who wanted to stay) and, according to Hutton's book, Freddie arrived to Wembley for Live Aid only a few hours before they were due on stage so they couldn't have met. The Diana/Freddie story in Vauxhall is nonsense with no proof nor provenance also.
I do recall Hutton mentioning that the only member of the Royal family that Freddie got to meet was Prince Andrew. This happened at the crush bar. The Diana story is no doubt a load of cobblers. Cleo Roccos claims that it happened around 1988. Not only many years after Freddie and Everett had fallen out, but also at a time when Freddie had little interest in trawling such venues anymore.
I believe it was about drugs and money. But at one point in Kenny's life, many people fell-out with him. In the late 80s his ex-wife wrote a book about him (which disclosed that Kenny was gay), which he initially gave her the go ahead to do, but when it was published he took it very badly. And this caused many people to distance themselves from him and side with the ex-wife.