I don't understand how "you don't go all out". I mean if you're not doing HD combos and MAX damages that's ok, but if you want to use your buddies for footsies practice what's the problem? For example some guy raw supers and you jab him out of it.... So? You practiced your spacing, timing, and footsie knowledge. Some guy keeps jumping so you keep jump air to air'ing him. Or you keep AA'ing him. So?
I can understand if your friends become discouraged by making ONE mistake and you opening a giant can o whupass on em, however if they're whining about being punished 50 health for committing the same mistake over and over then shame on them. Insanity is doing the same thing over and over and expecting a different result. So if you bait a DP, instead of punishing with a HUGE meterless combo just punish with a hp+special cancel. You get your baby tier punish, practice spacing and timing, and they don't feel like they're fighting out of their weight class.
Also one GREAT thing to practice against casual players is low profiling. Crouch b's can go under a LOT of attacks. So let's say you're babying your friends again, stroking their egos. Every jump in, crouch b under their attack, then continue blocking EVEN IF YOU COULD punish. You just successfully practiced a tactic to open up a gap in your opponent's offence without humiliating your pals. Furthermore THINK to yourself what the appropriate action to take after low profiling should be (Maybe low profiling with my character on that specific jump in allows me to b,b,b command normal, special, maybe my character has a fast enough close c or d that I can cl.c, command normal, special). Acknowledge it and continue the game.
Finally, even if your friends are casual: teach them. My one buddy used to go crazy in SF when I would mix him up so I started teaching him about crossups and mixups. He got better, forced me to evolve, and the cycle continued. That's what playing with your friends is about. It's not about just having a live person to beat up on or to joke around with. It's having a friend who evolves with you, forces you to grow. If you feed them knowledge thats like forcing yourself to grow at an even faster pace.