How do you respond to friends who say you are "watering down" the gospel because you believe in an old earth?Your question is provocatively stated.
My first rule in discussing this (and any other) contentious issue is to never do it at family reunions or parties. There is an appropriate time and place to talk about complex questions, and doing it at inappropriate times can be a real distraction, and often annoying, to others.
Second, it's critically important to gauge how serious the person asking the question is about finding an answer. Is this a topic that they truly want to dialogue about for more than five minutes? Great! I'm so there. But if it's just intended to provoke an argument or if they want an answer in three sentences or less, I usually don't even respond. Literally. That takes a great deal of self-control at times because I think my natural (sinful) inclination is to defend my position. But I've found over the years that I need to be a wise steward of my time and it's just not good time management, and often is more of a reflection of my poor social boundaries, when I choose to engage in these kinds of discussions just to defend myself from a bully or someone who is intellectually lazy. (This is why I don't engage in online debates or post on message boards.)
In almost every confrontational situation I find myself, my initial response is to ask questions of the person rather than actually responding to the "charge." Things like, Why do you think OEC waters-down the Gospel? How did you arrive at that belief? When did you start thinking this way? The overwhelming majority of the time, the person either has no idea or their answer is based on hearsay. At that point, I challenge them to read something actually written by a responsible OEC, like Jack Collins' book, Science & Faith. He's the chair of the Old Testament department at Covenant Theological Seminary (not exactly a liberal institution). That usually ends the conversation because they're too lazy to actually READ something.
On the flipside, I have spent a good amount of time reading the young-earth literature and equipping myself to thoroughly understand, articulate and even defend their positions. So if they ask me if I've ever read so-and-so, chances are, yes, I have. And I usually know more about the book than they do.
Finally, if the person is more sophisticated, I will ask more penetrating questions. How exactly does a belief in an old-earth water down the Gospel? Get them to be as specific as possible. Continue asking questions. If you do this, it will more than likely reveal to them that they don't know as much as they thought. Some will spit out some memorized answer from Answers in Genesis, frequently related to questions about animal death before Adam. But those can be answered pretty easily. Jack has some good discussion about that in his book. You could also listen to the audio series published by Reasons To Believe called, Life and Death in Eden.
As you can see, I'm not giving you a specific answer, but rather I'm trying to outline a general strategy for dialogue. Using strategic questions makes the person THINK and usually reveals their ignorance. If you simply want to engage in a competition of wills and who has the best arguments, then I'm not a very good person to ask because that's not really how I go about things.