The question should be more like: To breed or not to breed.

If you'd like to breed Elly the "proper" way, get her genetically tested and make sure she passes those tests. Labs are VERY prone to hip dysplasia so you'll have to get her OFA'd and/or PennHip'd. You'll also need to check those eyes since Labs are prone to PRA as well, so you'll need to get her CERF'd as well.

Does she have good conformation? The best way to tell is to champion her in the conformation ring. This doesn't mean, "Oh yeah, she's a beautiful dog and her puppies will be, too". This means putting your time and effort into entering her into local AKC-sanctioned shows and earning two majors on her and getting that championship. Who bred Elly? You'll need to get back in touch with Elly's original breeder so they can help you and your pup during this long difficult road.

As well, I'm not sure if your friend's AKC Labrador qualifies as a good stud. What does he have to offer the Labrador breed? As was mentioned before, Labs are the NUMBER 1 most popular breed in the AKC, meaning there are tens of thousands of Labs/mixes languishing in shelters to this day. Is he a champion in the ring? If not, is he skilled or championed in the field? Just because he has good drive or he looks pretty to you doesn't mean much unless he is proven in either the ring/field. Has he been tested for dysplastic hips? What about his thyroid? What about his eyes? What about his patellas? What about his parents' hips, eyes, hearts, and thyroids? What about his grandparents'? This is very important as genetic maladies often skip generations, so you'll need to study the pedigree of both Elly and Duke VERY diligantly.

Lastly, just because you're not breeding mixed breeds doesn't mean that you're not contributing to the overflow of dogs in shelters. A BYB doesn't breed just mixes. There are plenty of BYB's who breed purebred dogs. Breeding purebred Labs does not exempt you from anything. I hope you'll listen to us and the boards before and spay your dog or breed the *right* way. If we're all saying the same things, there is a reason why

Edit to add: If Elly is your step-dad's dog, try to explain to him why NOT to breed. As for health testing, visit these sites:
http://www.offa.org/
http://www.pennhip.org/
http://www.vmdb.org/cerf.html

You *need* to get these tests done on Elly and Duke. Otherwise, consider spaying her and adopting a needy Lab puppy from a nearby shelter