It seems this guy is not very experienced with cycling. Perhaps he comes from a background with less brutal honesty, and more unfounded positivity. (These things have no place in cycling)

If I were you, I'd tell him when the group was meeting, but bluntly tell him he'll be remorselessly dropped from the group in short order. Sounds to me like he needs a good dose of the cold truth. Perhaps you could also point him to some other n00b-friendly rides where he can get his skills up.

At least he did say "he feels bad", so his heart is in the right place, at the very least.