Feeling lead on, confused. Advice?

I apologize in advance if this is too wordy. I'm not used to writing things out like this but I am really hoping to hear some opinions about my situation.This has been going on for about 5 months now. Here are the details... I met a guy through work. We are in our early 20s. I started to develop feelings for him and after a couple weeks I worked up the courage to ask him out. All in this time he never mentioned being with anyone, but turns out has been seeing a girl (he is bisexual) for a month or so.His relationship with the girl was fresh, so he wanted to give it more time to develop. Fair enough. He told me that if he ended up single then he would let me know. Fair enough.Flash forward a bit and things don't work out with his girl. He tells me, asks me out, and we start dating. Things are great for awhile. But here is the kicker: 2 months into our relationship he gets a call from one of his ex girlfriends. Supposedly she is pregnant with his baby. He told me that we should break up so that he can go take care of his kid, and after some thought I agreed. Taking responsibility over something like that is more important than our little 2month fling. We decide to just be friends. Fair enough.He gets back with his ex for the sake of the kid. The problem is that we still interact as if we are together. We are more touchy/flirty than friends typically are. To top it all off, we hooked up the other night. I went to his house to watch a movie and before I knew it we were naked in his bed.I know that he and I need to discuss this. Im just not sure what to say, or how to say it.