How do I effectively play with friends?

Many people are discovering this problem and very clearly the easiest method is going to be to try to work with people who are on the same quest as you.

Given that will not always be possible the choice comes down to helping your friend catch up or speeding your friend to your quests and allowing them to replay them in their own time.

By maintaining a large friend list by joining a clan, playgroup or adding your name to the spreadsheet of a forum you participate in, you should be able to find someone who is in the same general vicinity as you. Unfortunately there is no method at present to group friends or to edit their names into something more familiar to you (eg a forum ID that you recognize instead of their BattleTag/RealID) so you should maintain a list somewhere to help you recall.

A great number of people (myself included) are deciding to solo Normal mode so that they can take all the time in the world to experience all the details and nuances before worrying about co-op play.

With more experience I've also taken the following action; play one character as my "get through the game, unlock things and get good loot" character and started another that I quickly levelled up. In my case my primary is a demon hunter and my secondary a barbarian. I get to play different content but still get to keep pace with my friend.

I also installed skype to give us voice chat, which helped a lot.

It turns out that you can jump ahead in quests to play with your friends. Just join their game (via Quick Join or a party invite) as long as they are in the same difficulty (or earlier) as you. You can optionally go back and complete your previous quests if you like on your own time.

This will ruin the story if you haven't done it on your first play through, but subsequent playthroughs should not be a problem.