I have implemented a physics engine based on the concepts in the classic text Advanced Character Physics by Thomas Jakobsen. Friction is only discussed very briefly in the article and Jakobsen himself notes how "other and better friction models than this could and should be implemented."

Generally how could one implement a believable friction model on top of the concepts from the mentioned article? And how could the found friction be translated into rotation on a circle?

I do not want this question to be about my specific implementation but about how to combine Jakobsens ideas with a great friction system more generally. But here is a live demo showing the current state of my engine which does not handle friction in any way: http://jsfiddle.net/Z7ECB/embedded/result/

Below is a picture showing and example on how collision detection could work in an engine based in the paper. In the Verlet integration the current and previous position is always stored. Based on these a new position is calculated. In every frame I calculate the distance between the circles and the lines. If this distance is less than a circles radius a collision has occurred and the circle is projected perpendicular out of the offending line according to the size of the overlap (offset on the picture).

Velocity is implicit due to Verlet integration so changing position also changes the velocity. What I need to do know is to somehow determine the amount of friction on the circle and move it backwards parallel to the line in order to reduce its speed.