Dad upset with friend in dismay (5)
I believe the answer is:
appal
'dismay' is the definition.
(I know that dismay can be written as appal)
'dad upset with friend' is the wordplay.
'dad' becomes 'pa' (both can mean one's father).
'upset' is a reversal indicator.
'with' says to put letters next to each other.
'friend' becomes 'pal' (pal can mean a friend).
'pa' backwards is 'ap'.
'ap'+'pal'='APPAL'
'in' is the link.
(Other definitions for appal that I've seen before include "Petrify" , "Fill with horror" , "exhibiting dismay" , "Shock, horrify" , "Greatly horrify" .)