A friend just picked up a new boat. With the key on and not running the volt gauge will drop from 12+ to 10 when you turn on the docking lights. This doesn't seem right?

the wire going to the lights might be to small and causing the drop, the batteries could be weak. Get a voltmeter and check the voltage in various spots with the lights on and off and see what you find. If you still have 12.something at the battery with the lights on wire is probably to small.

Going over to check battery voltage later this week. I forgot to mention that if you turn the lights on with the stereo on it kicks the stereo off. So, it seems like it truly is drawing too much voltage.

They normally wire these lights right to the main fuse panel. This panel is usually powered by the stock 10 gauge wire coming from the engine harness. The lights do draw some power, so what youre seeing is typical at the gauge. At the battery, Im sure the voltage will be much higher than what your seeing at the dash.