I recently had a one night stand with my friend.

Naughty, naughty. 

He admitted me that he fancied me all along, he knew I liked him and he said that he wanted to sleep with me, we were both drunk. Anyway we went back to my place and instead of just sleeping with me he kissed and cuddled me and stroked my hair,

When guys do this together with close eye contact before sex, it usually means they genuinely like you a lot. 

I always knew he cared about me a lot because he has always looked after me and been there for me like he is my dad (he is only 3 years older than me). We slept together but he said that he didn't care if he comed or not and just cuddled me. He told me ages ago that his ex hurt him really badly because she cheated on him with his friend, he told me this story again that night. I think that he is scared of love because of this.

Guys who have been hurt in the past are always ultra cautious with new women.  They don't want to get too attached to a woman only to find out that she is going to sleep with his best friend. 

The next day we saw each other at his party and he was really happy that I was there and constantly brushed past me and just looked really pleased to see me in general.

It's a sign of how much he feels about you.  If it was only a one night stand, then he would probably suffering from a sore, confused head and want to avoid you and certainly wouldn't be smiling at you. 

Obviously alcohol made us more confident but we did want to be together that night and we both don't regret it. I want to move this to a relationship stage, I know he wants a relationship deep down but is scared of getting hurt.

You need to take things slowly with him, let him move at his pace.  He should indicate to you what pace he wants to move it at, not in words but in his actions.

On another note I recently told you about a guy over christmas who said he was in a serious relationship with his girlfriend and I took your advice, he turned out to be BIG trouble,

Yes, I got the feeling he was by what you said in your later messages. 

well he is trying to get between me and this guy and is really jealous,

Typical, he doesn't like you, then he loses his girlfriend or probably told you he ditched her. Now he's all interested in you, now another guy has come on the scene in your life. 

my friend who I slept with knows I liked him before and I think he is scared that I will cheat on him with him (which I won't).

Guys are always scared of this, I know he's not an ex-boyfriend this other guy, but I know women that have gone back to ex-boyfriends half a dozen times when they've been going out with new boyfriends.  They keep it secret from most people but you often find out through the grapevine.  In this case your new boyfriend will be even more scared because the guy turned you down, men think that a woman will find this guy even more enticing because he turned you down.

They are both friends and the guy I slept with knows that the other guy is selfish and has a nasty streak.

Again that only adds to his burden, because he may have to fight him over you.  Whilst men are pretty tough when it comes to fighting, most men still prefer to avoid fights. 

I want to get the horrible guy out of the way because the guy I slept with is sensitive about getting hurt and the horrible guy is a manipulator and might take advantage of the whole situation

I'm not quite sure what methods you could do to get this other guy out of the way. 

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