I'm not sure it's fair to say that something in a city is "not OK" yet the same behavior in a small town is "OK" because it's unavoidable. If the argument is that being someone's physician and friend at the same time is an ethical conflict, then that conflict exists in all locations.
My personal take on this is somewhat different. There is no question that being someone's physician and friend at the same time is a potential conflict. It raises the possibility of "issues" -- such as those mentioned above in this thread. You have to consider whether getting an ice cream with your overweight friend is "acceptable". You need to firewall your clinical knowledge of the person when in public. What will you do if you see your recovered alcoholic patient/friend drinking alcohol? What will you do if you have a husband/wife couple as patients and friends, and one discloses to you that they are cheating on the other?
These are all ethical dilemmas that you MAY face. If you do face them, then you will need to address them. Like most ethical dilemmas, there's no easy answer (else it wouldn't be a dilemma, would it?).
One way to solve these types of dilemmas is to avoid them completely, by separating your friends and patients. This may or may not be possible given each person's clinical practice. Or, you can simply deal with them as they come up.
From a legal standpoint, it's "safer" to separate the two if possible. But it's not really a black and white issue. It's not "wrong" to be friends with a patient, and you might certainly become friends with someone who started as your patient and you don't have to fire them because of it. The key is: 1) are both of you comfortable with your dual relationship roles, and 2) can you remain objective about the care of the individual? The problem with this is that it's often impossible to assess your own objectivity, hence I usually recommend to residents / colleagues that someone impartial who knows both people do so.
I mentioned before (and will mention again) that anything romantic between a doc and patient is not acceptable at any time. of course, where friendship stops and romance starts is a grey zone and is the physician's responsibility to manage.
So, it's easier to treat your patients as clients. But, I can tell you from personal experience, it's much more fulfilling to be friends with your patients. Although there is always the risk of some ethical conflict which you need to watch for (and can get you into big trouble), there also can be huge benefits for both the physician and the patient.