Happymom2, you said, 'Anytime I go around them or peek in on them - he says (in front of her) "mom we aren't going to do anything" with the whole frustrated tone of voice and rolling the eyes.'
I would respond with, "Did I say anything? Why do you feel you have to defend yourself?" and keep moving, doing whatever you have to do.
I'd also talk to him afterwards about making a fool of himself (or seeming to make a fool of you) in front of 'company'.
I used to find that easy child (especially - the next two to a lesser extent) seemed to feel she HAD to be rude to me in a 'funny' way when she had friends over. It was as if she had to show her friends that she was in charge, I was just this personal slave-thing that roamed the house and did her bidding, a bit eccentric but needing to be patronised as an elderly family retainer. After her friends had gone I sat her down and said, "I chose to not react in front of your friends because I knew that if I called you on it, you would be embarrassed. But you frankly do not deserve my forbearance, when you treat me with such disrespect. Please be warned, I will not stand for it again. I will try to be tactful to see if you get the hint, now that I HAVE warned you, but if you do not back off and continue to insult me in front of your friends, you will get it back in front of them, with both barrels."
I remember from my school days, the other kids who used to openly brag about how they could do whatever they wanted, they had their parents on a string. They used to share stories about insults they'd thrown at their parents, without retribution. Of course, it was all bravado and lies, but kids do t his to big-note themselves to each other. And when easy child brought her friends home and tried it on - she only did it once, before I slapped her down.
My kids know that if they try to embarrass me in front of their friends, I will turn the tables, BIG time. But I did feel the need to warn them, and not just let them have it both barrels without warning.
So if my kid was making a big thing of my apparently 'spying' on them, I would go fetch my knitting and sit with them, strike up a conversation with the visiting friend and maybe share funny stories about when my child was being toilet-trained, or first wet his pants when scared by a big dog (or similar). Keep it happy, friendly, light - the more you can successfully engage the visitor, the more you are being a good hostess AND ensuring nothing is going on.
HOWEVER - when your child is old enough to go where he/she wants and to have certain freedoms, there are limits as to how much you can watch them. Because of where we live, friends have generally had to sleep over. Where possible we didn't allow friends of the opposite sex to sleep over in the early teens. We also didn't allow our kids to sleep over anywhere else where there were kids of the opposite sex.
But it does get to a point where you can't avoid it, and by that stage it's also illegal to lock your kids' doors. And you can't sleep on the floor outside their bedroom, not too often. And even if you succeed in keeping them from consummating their relationship under your roof - is that such a big achievement, when they can easily do whatever they want in so many places you wouldn't dream of, including a walk in the park, in a shopping centre toilet, in a car, in someone else's house in the middle of the day - anywhere? If they're determined to have sex, they will.
So when I realised that it was heading in that direction, I changed tack. I made it clear that if they felt mature enough to take on an adult relationship, that also had to take on the adult responsibilities to the same extent. So I took my kids shopping for contraceptives. Medical check-up; for the girls - Pap smears, breast checks, internal examinations, prescriptions for the Pill; for both - a lecture on sexual responsibility and sexual health, more tests, a talk from the GP about what to do. I think what horrified them the most was my constantly reminding them that they were NOT the result of Immaculate Conception. I knew too much and it scared them. Having premarital sex loses a lot of its romance and excitement when you keep mentally visualising your parents and grandparents doing 'it'. And shopping for condoms in the supermarket with your mother totally kills the romance. "Do you want ribbed, unribbed, flavoured or coloured? Don't get the banana ones, they taste horrible." Especially when other shoppers glance in their direction, I'm sure with both my girls it kept them virgin for at least another six months...
And when they finally DID take that step - they were on the Pill, they were safe under our roof (or in easy child's case, with BF1's family) and had someone nearby to talk to in case they needed it. To have the first time happen in the back of someone's car, or a quick fumble in the dark when they're both inexperienced, scared and unprepared - not what I would want for any of my children.
I'd rather they waited - but I'd done everything I could and they made their own decisions. The next best thing was all I could do - make sure they were safe, and responsible.
difficult child 3 is still way too young, and difficult child 1 has chosen to wait until he's married - I think girlfriend is the luckiest girl in Sydney.
Marg
if I embarrass you or not. So we will discuss this tomorrow evening in a little more detail. 
