gosh!!!
while he has nothing diagnosed... his behaviour is just not acceptable (not for any age!!) and i totally feel for his mum!
I think you really need to have a sit down with the mum and try to come across in a way that isn't attacking her (or could be percieved that way) Your friend needs alot of support.

I have no clue on your girlfriends background or what the 2 year old has been thru.. but 2yo's dont just learn how to spit on people and slap them without some sort of bad behaviour from a adult or older child. The sooner your girl friend reins in her 2yo bad behaviour the better. It might be worth seeing if you can find any parenting books or anything to do with the nanny?? what was her name the chic from the UK... anyways the child may need more attention/quality time with his mum. But most of all he needs boundaries, he needs to know that as soon as he misbehaves he will get some form of punishment (naughty mat) and that mum has to be consisitant.. she can't let it slip up. (kids constantly test parents out to see how far they can go and what they can get away with doing!)

Aside from any parenting gems you can let her in on...
You have a right to be wary of what behaviour he is modeling for your children! Kids are like sponges and they will soak everything up. Like the saying "Kids do as you do. Not as you say!!"

She also needs to think of turning his bad behaviour around so he can later go to daycare (if needed), be left with other family or friends, starting kinder/preschool and the big kindergarten/prep year at school.

im not sure how you'd word it out to her, that you think she and her son should move out. perhaps figuring if your willing to help out if she is willing to stick to some guidelines and seeing improvement with behaviour... i think youre in quite a predicament! Wishing u luck!