The nicest way to let somebody down, over the long haul, is just to be honest with them.
Tell them – “It’s not going to happen between you two” or some variation of that. It will sting but they will move on. If you drag that shit on you will just hurt them more by making them think your niceness is an indication that there is something to hold onto.
And that friendship shit has to be put on hiatus while he gets over you.