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Steam Families bugs...
https://steamcommunity.com/groups/steamfamilies/discussions/1/
Then that is the problem. You can only share with people inside the program after you join/entered a family.
Old family share connections outside the family will still show up in the library but will give you an error when trying to play them or set them as the preferred copy.
Just be careful, even if you leave the BETA your family will still be active and the old Family Share will not work. You would need to leave the family for that and that will trigger a 1 year cooldown before you can create/join another family.
Best solution would be to invite that friend to your Steam family if you have a open slot.
Yeah, for the first few days of the BETA that worked but it was changed with a update 2 days ago or so. Since then the old connections do no longer work if you are in the BETA.
Happened to me too.