Learn Spanish (Latin America): La idea de mi amigo es excelente.

Spanish doesn't use an apostrophe 's' to show possession. Instead, you have to use the word de (of). So, to say "my friend's idea", you literally say "the idea of my friend" (la idea de mi amigo).

Since idea is a feminine word (la idea), shouldn't excelente end in an "a"?

Not all adjectives change their ending to match the gender of the noun. Adjectives that end in -e in Spanish, like excelente or inteligente, stay exactly the same for both masculine and feminine nouns.

Why do we use es instead of está for "is" in this sentence?

We use es (from the verb ser) because we are describing a core characteristic or quality of the idea. You use ser to describe what things are like fundamentally, while estar is used for temporary states or locations.

Do I ever combine de and mi into one word like del?

No. You only combine de and el (the masculine word for "the") to make the contraction del. When de is followed by mi ("my"), they always stay as two separate words.