It sounds like you are in one big love confusion. I'm glad you have come to get some support about it, maybe I can help you work things out, even in your head. So, if I understand right, you and a friend like this guy. But he likes you back, even though he knows you like him. And he doesn't like your friend. You sound like a pretty nice and concerned girl, but this only makes sense for you to still go with this guy. You two are interested in one another, and although it might suck for the other girl, she will have to find someone else. Not going out with him because she likes him won't change a thing, because he doesn't like her back anyways.
Once you two start going with you two, I don't think he will like your other friend even a little any more. If he has you, he doesn't need to focus on other girls and could lose any love-like feelings with her without really trying.
You deserve to go out with him, and so the other girl will have to figure things out with someone else, because he doesn't like her, he likes you!
If you want to talk to me, you can make an account on here and message me, or email me at Tavis.Paddle@gmail.com.
-Tavis