1)I would subtly tell them that maybe it was just ok, but point out good things that they had done to kind of even out the balance. I would point out mistakes that they had made, or things they could improve on, without trying to hurt their feelings [as much as possible].
2) Constructive suggestions! Although i'm sure if you do have friends on Ficwad, you would probably feel compelled to an extent to rate their story, but be honest anyway!
3)No, well.. If a writer knows it's crap, why post it? Although, if they want to improve and see why people think it's crap, it's fine. I absolutely DETEST when writers warn you that it's going to be crap, so then you are in a predetermined mindset if you do read it, in which case i wouldn't; why waste time?
4)If the writer says their spg is terrible and don't make an attempt to fix it or do a simple spell check, they dont deserve to be able to post! lol, but seriously. They are basically admitting that they are just lazy! Bad spelling and grammar would literally drive me around the bend. If the story was REALLY good, i would tolerate it, but at the end of the day, good grammar, spelling, etc. makes you like the story more. You can't comcentrate on a storyline if you are spending half of your time trying to decipher the words. It's something that should be taken for granted.
Oh gawd, hopefully there aren't a load of spelling mistakes in this! lol