Holy crap that's a messed up situation.
I've seen something similar happen in my friends circle. My bird's best friend and my best mate got introduced after we started dating and they got along really well. Eventually the 4 of us began hanging out a lot, and surprise surprise he started fancying her. They're both awesome people and I thought it would work, she seemed very fond of him and all. Started dating and a few months down the road, this girl (my mate's girlfriend ) at the time calls me at like 3 am one weekend and says she needs to talk and its urgent, so we spoke for quite a long time on the phone and she said it was really comfortable with him as friends and she enjoyed his company a lot and felt she could trust him. Also said she found him quite attractive but there was no spark, and since she hadn't dated before, she said yes when he wanted to go out with her...liked how the dates went so went along with it thinking she'd develop feelings. 5 months later - nothing, and she didn't want to string him along cause of the same reasons as you've said basically...she eventually had a really long chat with him, and went into detail about everything, explained it all to him, and told him she was really sorry, and she wished it could work etc. My mate had the wind knocked out of him cause he thought they were doing well, but she made it clear, she wanted to be friends, and would give him space if he needed, but no matter what she wanted to be a part of his life.
My tip - have the talk, and soon, when you're alone and have a LOT of time to talk. Explain everything, be honest about everything 100%. He'll be angry for a bit (at least my mate was) but eventually (2-3 months after the breakup, he 'got it' and moved on. Went to her and said he was sorry for being distant and needed the time apart (crucial, spend some time apart, cause if not, he'll see you, feelings will be there and there will be bitterness - best to be away, let him think it out, gain some perspective, heal etc). It'll take time, but eventually if he's the awesome and understanding guy you say he is, he'll see your point of view.
I think he used to /still posts on here. So anon .