Well, you raise a couple of interesting points here, so we're going to break it down. First of all, congratulations on being asked by your friends to be their child's godparent -- it's an honor to be asked, and it shows that they have a great deal of love for you. After all, they're trusting you with one of the most valuable things in their lives -- their child. That having been said, it's important that you understand what would be expected of you in the role of godparent.
Traditionally, the role of godparent is filled by someone who can and will provide spiritual and emotional guidance if something happens to the child's parents. Often it's a family member, such as an aunt or uncle. Usually, the selected godparent appears -- as you've been invited to do -- at the child's baptism, as a way of publicly declaring that they will take care of the child in case of the death of the parents. In the Catholic church, the godparent is someone who is also a practicing Catholic, and who promises to continue overseeing the child's Catholic upbringing, in the event that something happens to the parents. However, in some cases, the role of godparent is more of a symbolic one, and not tied to any specific religious committments.
What's important here is that you talk to your friend and find out what he and his wife expect from you in the event of their untimely deaths. Do they want you to supervise the child's spiritual upbringing, in their church, if something happens to them? If that's the case, you need to ask yourself whether you can make and keep such a promise -- and you're the only one who can make that decision. What's crucial here, though, is that you are open and honest with your friends about their needs and any reservations they may have -- and it's important that you discuss these things with them before the ceremony, rather than after the fact.
Also, keep in mind that being selected as a godparent does not make you a legal guardian in the event of the death of the child's parents. Although many godparents are also designated as the legal guardians of a child, this is something that would be set out in a will or other legal document, and has nothing to do with the church ceremony.
I know one Catholic couple whose children have two sets of godparents. There is the Catholic set of godparents, who stood at the children's baptisms and who have promised to make sure the kids get a good solid Catholic uprbinging if their parents die. Then there is a second set of godparents -- one Jewish and one Wiccan -- who they consider their "godparents of the heart." This couple is there to provide emotional support, and their title is more honorary than anything else, but it works for everyone involved.
Again, congratulations on being asked by your friend to take on such an important role, and I hope you're able to get everything resolved in way that's beneficial to everyone.
