Is it correct to say "the chicken salad made me nauseous," meaning that it made me feel sick to my stomach? My friend says that this would mean that it made me disgusting.
Your friend is not alone. A number of usage guides insist that "nauseous" can only mean "causing nausea." Week-old chicken salad would be nauseous, they say, and it makes you nauseated.
These usage guides are outdated.
The use of "nauseous" to mean "feeling sick" appears to have originated in New York City shortly after World War II. Despite the best efforts of teachers and other prescriptivists, it is now a completely standard meaning. To quote Merriam-Webster's Dictionary of English Usage, "Any handbook that tells you that nauseous cannot mean 'nauseated' is out of touch with the contemporary language. In current use it seldom means anything else."
With that said, if you wish to play it safe, there is a simple set of alternatives. Use "nauseating" for things that make you sick and "nauseated" for feeling sick.