My friend is Mexican, and does not have an American ID.
If he goes to a club, they always let him in with his Mexican ID.. But is this illegal?
Can bars legally accept foreign government issued IDs as a form as identification and proof of age?

Absolutely. Particularly commonplace in the border states where large portions of the population have such ID, Mexican driver licenses, etc.

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While pointers can be helpful, ultimately the number one lesson in any legal action is: don't take legal advice from books, family, friends, co-workers, police officers, grocery clerks, web sites, or people on legal message boards. The only person who can give YOU legal advice is YOUR attorney.

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The reason I was asking was because most bars accepted his ID, except we got to one club that wouldn't let him in. He checked his ID, and said, " I can't accept this. I can go to jail."
Did he just not know what he was talking about?

He can't go to jail JUST for accepting the foreign ID. He CAN go to jail for allowing or assisting in the sale of alcohol to a minor, and if this particular person isn't comfortable with accepting the form of ID given, they DO have the absolute right to refuse service. Similarly, if the person was unfamiliar with, for example, an ID from Florida, and couldn't tell if it was a legit ID or not, they could refuse entry/service. The business bears the legal burden to only serve those persons whose identity and age can be reasonably verified. So each businesses have a wide degree of leeway in what forms of ID they'll accept. Sounds like this particular business was playing "better safe than sorry", or, they could have had OTHER reasons for not wanting to admit the individual, and used this foreign ID issue as their "excuse", rather than the real reason (for example, only wanting to serve Americans).

__________________
While pointers can be helpful, ultimately the number one lesson in any legal action is: don't take legal advice from books, family, friends, co-workers, police officers, grocery clerks, web sites, or people on legal message boards. The only person who can give YOU legal advice is YOUR attorney.

http://www.aardvarc.org

Have you browsed through the information in LawInfo's Free Legal Resource Center to learn more about your issue yet? See: http://www.lawinfo.com/consumer.html and http://resources.lawinfo.com/en/index.html. You can certainly try to speak to a lawyer to determine what legal options may be available. In the meantime, you may be able to learn more on your own. Search the "Free Legal Resources" tab, or browse the Consumer Resources. Good luck.