Hi welcome to Holiday Truth

Just wondered if any one can confirm that the word 'habibi' means 'darling/babe' in Tunisian Arabic? Also is this the best way to spell it?

Yes the spelling would be regarded as correct.
You would usually accept that Habibi means 'my baby' or 'my darling' or my friend, however there are a few slight variations in the meaning depending on the context it is being used in.

Take a look at this for more detailed info http://forum.wordreference.com/showthread.php?t=26785

Although the greeting 'Habibi' would be a used by a couple is not solely used between lovers, it would be used between a group of friends male to male or female to female or a mother & son for instance.

An example is that when we meet some of our local friends in Egypt when we go back I would give them a hug and say Habibi.

One last thing Habibi is masculine and if addressing a female you would generally say Habibti.

Hope this helps you a bit
Graham

There's also a Tunisian version of habibi which sounds like hoby.

Thank you for you replies! I'm a little confused now though, which version of the word would be more appropriate when speaking to a Tunisian person? Or would they understand both?

They would be familiar with both. If you're a music fan then check out Amrr Diab "Habibi". Always makes me want to dance my socks off. http://www.youtube.com/watch?v=CVpkkiySymI

For saying "I love you" its (pronounced) Any Habuk Inti - thats how I say it to hubby anyway lol!