It seems harsh to tell her they have been dead for ten years but the same question will appear the following evening. I keep telling her they are not arriving tonight.
It is harsh to tell your wife that her friends are all dead and not coming to dinner. Harsh and unnecessary.
Your way of handling it is best. Tell her that her friends are unable to make it tonight. That you have to tell her this every evening is how we deal with our loved ones who have dementia. It's unfair and uncomfortable and it bothers us but when dealing with someone with dementia we take the way that is unlikely to cause pain day after day.
You are doing the right thing to tell her those friends can't come tonight. You might move on to talking about the friends a bit. "That Bill is a real character, isn't he? Remember the time he ..." If they are on her mind she might enjoy a little reminiscing about them.
Your way of handling it is best. Tell her that her friends are unable to make it tonight. That you have to tell her this every evening is how we deal with our loved ones who have dementia. It's unfair and uncomfortable and it bothers us but when dealing with someone with dementia we take the way that is unlikely to cause pain day after day.
You're doing the right thing.