In reflecting on the situation and what led up to it, I'll just say this as a public service announcement to all you regular people out there trying to do the right thing:
Honesty is the best policy for a reason. It can seem kinder to keep hurtful things to yourself, but remember: trust betrayed is the worst kind of hurt. Beyond the immediate feeling of betrayal, you damage the person's ability to trust you again, to trust others and to his / her judgment. It's three or four times the pain you would have caused by simply being honest.
Yes, truth is the kinder route. But if that's not enough of a reason to be honest, consider the obvious: it's a whole lot easier to remember the truth than the little lies that build up.
Be kind; tell the truth.
You can find the "Honesty Jar" image in protactinium's flickr stream.