ok.... he's known you for five years, and presumably has known you're straight for five years but asked you out anyway?

Buddy, he doesn't need to be let down gently, he needs to be hit over the head with a large, heavy object. This may reset his grip on reality. He's obviously lost it, or has never had one to begin with.

Why don't you say somethng like "OK... I'm straight... you know this... what would make you think I'd wanna go out with you? Did you miss the whole... yoou-have-a-penis thing?"