Until what age is cornertime ok as a punishment and what is an acceptable duration for it?

That's called abuse. Standing there for two hours with their arms over their heads while a guest is over is a form of humiliation. Standing in the corner isn't an acceptable punishment for kids their age, it's only good for children aged about 3-7, and two hours is just horrible! I would talk to your friend about this, but don't do what someone else said and break off the friendship, those kids might need you if the punishments get worse down the road.