Physical attraction is an important part of any romantic relationship, especially at the start. If 'this guy' isn't attracted to his friend at all, he needs to try and let her down easy, in an attempt to save the friendship. Pursuing a romantic relationship with someone you have no attraction for cannot and will not end well.
On the other hand, physical attraction can't be the only thing. If that is the only thing attracting 'your friend' towards this other girl, then 'your friend' should probably give it up. At least, assuming he's not the kind of hunk or hottie who can attract someone on the same shallow level that he's looking at this girl from.
The fact that 'your friend' has been silently watching her from afar for so long implies otherwise, and isn't very healthy, regardless. In any event, be direct. If 'your friend' actually want to date her then 'he' should ask her out. Otherwise....
If it were me, I'd think long and hard about the friend. 'your friend' and 'his friend' already share some interests, and she obviously wants to see if more could come from it. That she made the first move speaks a lot for her confidence and character as well. But, again, if it isn't mutual, then it could only end poorly. So, yeah, think about it. 'Your friend' needs to know what 'he' wants, and why 'he' wants it, before he can figure out what he should do.