Your friend needs to spend the necessary time to sort out that mess of emotions that he's dealing with. Until he takes the time to work through the emotions that he's battling with, he won't be able to make any sound, confident decisions about resolving these circumstances. You kind of hinted at it but could his fear of being hurt (again) make him subconsciously feel noncommital towards both parties?

It seemed kinda odd to me that you said he's only known the other woman for 2 weeks. Aside from the obvious butterflies that people can get when they first meet someone, two weeks doesn't sound like a suitable amount of time for two people to really know the extent of their feelings for one another under normal circumstances. Is he empathetic? Is that why he's so torn up about hurting her feelings? Does hurting her feelings make him identify with those feelings from his past and that's why he's so bent out of shape about this?

Maybe you could take a step back and grant him some space to sort his emotions out and clear his mind. It wouldn't hurt to tell him that's what you want him to do. You know that's what he has to do for this situation to proceed in a healthy direction for all parties. If he doesn't address the heart of the matter then the same emotional 'conflicts' will continue to resurface and manifest in different ways in the future.

Plus in light of recent discussions it sounds like you could benefit from devoting some more time focusing on YOU. That's why I hinted at riding 'solo' for a bit.