Just a quick note - in your position I would probably tell him I was not comfortable with him dating her because she has already said she is in love with him. I get people get to make their own decisions, but I find it cruel when somebody doesn't love somebody who loves them, but is willing to use them for a fuckbuddy while it is convenient.
That just doesn't strike me as a caring friend. I don't think I could be in any relationship with somebody who consciously did that though. I might not be vehement in my feelings with a secondary sort of partner in this case, but I certainly would be with my husband if he was to want to do something like that. In either case, if it impacted our relationship at all in any way that I had to see the negative effect it was having on her, I would probably feel obliged to end the relationship if the woman's pain and misery and un-returned love wasn't enough to get my partner to end it.
edit: I really do want to say I don't envy your position. It is nice to see you considering all the angles.
Happiness will never come to those who fail to appreciate what they already have.