now that is a pickle...well firstly ur friend can't be much of a friend of she's going back out with him.
We all know that there's no easy (and possibly happy) solution but who's happiness do u wanna put first.
Yours or his? You're right he does sound like a genuinely nice guy (ah the rare breed of the male human).
If you want to put your happiness before his then by all means do what you can to break them up, leaving both him and ur friend unhappy.
On the otherhand you could put his happiness first and continue to support both of them.
This could have two outcomes:
1 You could wait until he finishes with her and then make your move..or
2 Move on. I know it's easier said than done but it can be just as easy to fall out of love as it is to fall in love. I was in love once - with this girl who didn't like me - for 6 months.
It took me a while to realize and accept that nothing would ever happen but in the end, i fell out of love with her. Im not saying it won't be painful - it will be seeing them together every day, but which is the best way?