This reminds me of an introductory psychology course I'm taking. In one lecture the teacher explained how you might eat a chocolate cupcake, then come down with the flu, and then stop eating cupcakes.
I think the important thing to do is analyse the situation and separate between what you did right and what you did wrong. What you should keep doing and what you should avoid.
It seems to me, going to that festival was a good idea, and asking the guy out was a good idea - you couldn't know how it would turn out until you tried.
However, staying in an uncomfortable situation because you were afraid of hurting his feelings was the bad idea.
I know what it's like to feel guilty because you feel like you "lead someone on". You didn't. You acted interested because you WERE interested. Then he started making you uncomfortable, for whatever reason. Don't force yourself to interact with people that give you the creeps.
He might be an awesome guy, but even moreso if he is, he doesn't deserve a pity friendship. It would never have led anywhere, you had to break things off at some point, and the longer you waited, the worst it would have been
You might think it's nice not to reject someone flat out, but the more hope you give someone, the more they create feelings and attachment and the more crushed they are when you finally do reject them.
As much as it would have disappointed him, after the date turned out terribly you should have told him it just wasn't working, and if he kept contacting you, that he was contacting you too much.
You need to be assertive about what you want. You know what you comfort level is, other people do not, and it's good to let them know. It is respectful to them, for respectful than leading them on - which you didn't do at the festival, but you did with the friendship.
Someday he'll meet someone and it won't be awkward when they date, or it will be but they'll laugh about it and want to see each other again. If he needs to be more confident, you might think that turning him down would hurt, but dragging it on hurts more.
As for not wanting to take risks anymore: sometimes risks don't pay off, and we get hurt. We ask someone out we like and they say no. We try something new and something bad happen. We need to dissociate between the bad consequence and what we did. If you want someone to eventually say yes, you need to keep asking people. If you want to experience new things, you need to try new things.
There isn't always a clear-cut answer. It takes introspection to decide between what we should learn from and what we should brush aside and try again.