>>3 Dont give her false hope, all that will cause is that she will fall from a higher place. He isnt obligated to fall in love with her because she is being nice.
>>1 I am not saying you cant change what he thinks about you, but he either:
a) Thinks of you as a trustworthy friend. This is probably not that great for you, because, well, he already gave you a role in his life that he assumes you are and its very hard to change that.
b) He said it because he is as awkward as you are and he just wanted to know if you try to stop him. Honestly, if this has been going on for too long without the relationship moving in any significant way, even if he would love you, he might just be confused about whether or not he can fall in love with someone else or not.
IMO you should just tell him how you feel, it will prevent confusion and based on what I read here it wouldnt endanger the relationship you currently have in any way. If he doesnt have feelings for you, you can just go back to being friend, but if he breaks up with the girl he likes, hell know you are there. Its a win-win.