The best advice I can give you is to be honest with him, and as you have indicated you want to let him down gently, so there is no reason you can't be both honest and gentle. Think about how you would like to be let down gently and just think of this when you are letting him down. I know when I was in high school there was a girl I dated for a little while and she really liked me a LOT, and I liked the fact that she felt this way about me, but I didn't feel quite the same way about her, and before we became to involved (sexual) I sat her down and was gentle but honest with her. Granted I felt bad that I hurt her feelings, but was glad we hadn't become sexual and then I had to let her down, because it would have seemed that I just used her. So while I didn't like hurting her I was glad I was honest with her. I hope that helps
I'm sure he knows how you feel; there's no reason to hurt his feelings by saying it to him directly. If he asks you on a formal date THEN you would have to tell him that you justy want to stay friends.
this kind of stuff is always hard, because it sounds like you don't want to lose him as a friend or hurt him :(
just be honest, and do it as soon as possible, the longer he doesn't know the more attached he will be and the harder it will become
talk to him and tell him you don't want to hurt his feelings or anything, but you think it would be best if the two of you were only friends. make sure you leave no room for confusion so he doesn't keep on thinking there might be a chance.