My first reaction was that if you're asking this, he's probably too good for you. You need someone who's hotter and not as attentive or as fun, and leave him for someone who will appreciate him for the great guy he is. But that's kind of harsh.
So my second reaction is to decide what YOU want to do. If you like him and he's into you, and he treats you well and you appreciate and respect him, then you have the makings for a great relationship. Letting yourself be dictated by your friend's idea of attractive is letting yourself be controlled in a sense. Stand up for yourself. If you like this guy, go for him.
So you like a guy and think he's cute but you don't know what to do because your friend told you he's ugly? Excuse my french but that's bullsh*t. If you like him, go for it. Looks fade away eventually and you'll be left with your personality. So yeah, go for it ;)
Look. Here's my own personal experience. I used to talk to two different guys on msn, just as friends. They were really similar to me in music taste, movies, you name it.
Guy #1 He wasn't good looking at all. Physically, he did nothing for me. BUT, he had the greatest personality ever. He was sweet, caring, and I could hold an interesting conversation with him for hours. I really enjoyed talking to him.
Guy #2 He was the definition of attractive to me. Very cute. He was nice, but couldn't keep a conversation. NEVER. He was kind of empty up there because all he could talk about was sex related things. I didn't like talking to him as much.
Bottom line, personality works WONDERS. Even though physical appearance may mean a lot to some, it doesn't matter in the end. Plus, if you think the guys is cute, GO FOR IT! That's even better. Your opinion and what you feel is all that matters.
In my opinion, if you can stand his looks go for it. He doesn't have to be gorgeous because no one is perfect but if you date someone that totally turns you off because of his looks don't torture yourself. But you said he was cute right? So I think you can handle it. What are you waiting for go get him ! xP
Act your age and stop being dictated to by your friends. If you are shallow then don't date him. Since you think he is cute and has a good personality I don't get why you don't know what you should do...
If you like him and find him attractive then that is all that matters. Looks are overrated.