How irritating, whatever the reason, he's burst a blissful bubble hasn't he? He should know that something like this, even getting beyond it, is going to taint your view of him going onwards.
Basically, if there is no attraction, there is no guilt and there becomes no need to mention. As there was a need to mention on his part, and he did feel guilt, either he is attracted to her, or he knows she is attracted to him. As they have both stayed in contact over the year, I'd say there is likely attraction on both sides, but they haven't progressed with it as it would be too long distance to maintain any relationship.
He's played down the no spark to make you feel less worried, nobody would bother with someone hundreds of miles away, that they had no spark with, for a year, you just wouldn't bother with a 2nd date even. It's the mutual attraction that has kept the contact up, and the distance may have kept it on a more platonic level so far, but if circumstances and proximity were to change, then this will likely develop further.
He's risked what he has with you for something that at present would not be workable, so there must be some meaning and feeling attached to it, regardless of what he protests.
He needs to decide if this 'friendship' is worth more to him than what you have, because it is BU to maintain both. If he doesn't conclude and tell you that he's going to let the past go, I think you should let him go.