It's good that you do not want to enable him to cheat. But is it really so much more ethical to stand there and watch him cheat with someone else?
Do you honestly think that merely discontinuing the sexual part will keep anyone from getting hurt? If he's willing to continue the sexual relationship with you behind her back, then he'll have no qualms about doing it with other women. That's just how he is. Until he sees that as a problem, even just being his friend and knowing that's going on is a form of enabling him.
Personally, I couldn't stand back and watch any of my friends cheat on their partners, without feeling a tremendous amount of guilt that I knew it was going on and did nothing to stop it. I could never be in the same room with her, look her in the eye, and not feel compelled to tell her what was going on.
What would happen if you encouraged him to tell her the truth, that he's really not monogamous? If you like her enough to protect her by stepping out of the sexual picture, then don't you think she deserves to know what her new boyfriend is really like?
I don't see how keeping his secret is any less deceptive than actually participating. But if that's what makes you feel better, it's your conscience...
“As I am sure any cat owner will be able to tell you,
someone else putting you in a box is entirely different
from getting into a box yourself.” —bisexualbaker