I've just come out of a long term relationship and we tried the whole 'being friends' thing for a bit, but sadly because of how acrimonious the split was (lots of lying and deceit on her side), being friends just didn't work and we don't speak any more.
It doesn't sound that way for you, which is good, but there are some things to bear in mind. Firstly, will you or he use this as an excuse to try to be in a relationship again, i.e. can you maintain those boundaries which come with friendship and recognise that you're just friends now? If the answer is no, then you should avoid being friends: you'll only feel fresh heartache down the line. Secondly, can you separate the break up from your friendship? Will you hold that against him or still have those feelings of love for him? Again, if that's the case, then avoid the friendship. Thirdly, is this a kind way of him letting you down gently? He mentions still being friends which will obviously be long distance, but says that a long-distance relationship can't work. I know that there are different levels of commitment involved, but perhaps he used that excuse to spare your feelings. However, whatever you decide, it must be your decision, not mine, and I only offer some thoughts on things to consider.