I've got two domain names for "friend/clients" that I want to transfer to them because they aren't paying me to maintain them.

#1 based on the fact? that you do not really want this responsibility and the fact? that you have attempted to transfer on numerous occasions and are seemingly being ignored?

One final notification that a transfer has been attempted/is available. Set out the procedure for transferring domain names so they are clear on the part they need to play, explain the domain registration procedure for expired names i.e the period reserved for the present registrant to renew that name after expiration etc

Offer an alternative option whereby you will act on behalf of them and renew the name but that there will be an administration fee for doing so.

Finally explain that in the event of no instruction as to how the client wishes to proceed the domain name will be allowed to expire on 01/01/11

Well, I contacted both people and one called and promised to bring me cash to renew the domain (which never happened) and the other didn't respond at all. Both are really good domain names so the one that's set to expire this week I renewed and assumed ownership of it. I set both DNS settings to godaddy's parked domain page. The other will expire next month and I'll probably assume ownership of it as well and probably auction it.

Fair enough, if you have given fair warning about letting domains expire and given them every chance to renew and informed them of the period after expiration during which they may still register the name then register it as yours. I think the simple key action in all this is simple clear instruction to the people via email so that there can be no doubt on the course of events that will unfold.