Welcome to posting! (I see this is your first post around these parts
First of all, I'm very sorry for the loss of your friend and your bad breakup. And I wish you all the best with healing over those things.
Onto your story...
We can never know what's in someone else's mind entirely. However, I try very very hard to simply take people at face value. When they say something, I assume they mean it.
So when your friend said that he can't do "whatever it is" you guys were doing, I take that to mean he's not at all interested in a relationship beyond friendship. In fact, he's shown it to be that way. You might have friendly little tiffs over things, but he hasn't really made any effort to date you.
It sounds to me like he was a good friend to have while you've been going through all of this, but that it's likely time for you... if you want an actual
romantic relationship... to look elsewhere.
Good luck with whatever you decide to do.