When X met Y, who both met Z

Interesting conversation today. For the sake of privacy, let's say two people, X and Y, are BFF's. X and Y both like the same person, Z, who is a mutual friend. Z's a one-of-a-kind babe, so both are considering pursuing her.

Lame love triangle right? But what if X is aware that Y is interested in Z, but Y is not aware? Here's a diagram to illustrate with Jessica Alba playing the part of Z:
The person I was talking to was X, and I had no idea what to tell him. That's an uber sticky situation, if you know what I'm saying. If X made a move on Z, KNOWING that Y is interested, isn't he knowingly hurting his BFF? What if X and Z go out? Doesn't X feel guilty? How does Y react if that happens?

The alternative would be for X to do nothing, and then watch if Y makes a move on Z. How shitty is that? How does X act when he has to hang out with Y and Z? Does he suck it up for the sake of his friend's happiness?

I couldn't help him. I would have no idea what to do in that situation. Have a board meeting with everyone involved and spell it out?

I think the Wizard of Oz said it best when he said: "As for you, my galvanized friend, you want a heart. You don't know how lucky you are not to have one. Hearts will never be practical until they can be made unbreakable."

Hope it works out for you X...