I can tell you that you have certainly gotten some good advice here so far. "DO NOT start avoiding him like every other girl does when they find out someone likes them because it hurts more than rejection in my opinion." bingo on this one. Follow this advice. I know for a fact that it hurts more than rejection. Next, "if you decide not to give him a chance he might think there is something wrong with him" couldn't be more accurate. There was this girl I really cared about, and it seemed like she did me, but she didn't give me a chance and went with this other guy instead. The question "what's wrong with me?" played like a broken record in my head. Totally not what you want to do to a nice guy like the guy you're talking about.
Being in those shoes before, I find it hard to say anything but "give him a chance". In saying that I will give you my own words of advice here. If you do give him a chance, communicate, communicate, communicate. If you don't, it's going to be doomed to fail, and your friendship will be over too. Also, figure out what it is you are looking for in a guy, that will help understanding how you do or don't feel over time. If you decide not to give him a chance, you better damn well give him a reason. If he isn't attractive you best tell him "Look, I hate to sound shallow, but there's just no attraction here." I would have rather heard that than nothing. A definitive answer is something. If you give him nothing, he will NEVER know for certain, and may tear himself to pieces trying to figure out something he can't. If he lacks confidence and that's just not acceptable for you tell him "You're a nice guy, but you are too shy and reserved for me." Whatever it is, just make sure you let him know why, and obviously be adult about it.
I know it may seem like pointing out a persons flaw in your eyes accomplishes nothing, but again, it's a matter of communication, even if things aren't going to work out. Not communicating what you think or feel is never going to help the other person along.
Hope this helped.