I apologize if somebody already said this, but I couldn't read all of the thread (on my way to work.)
If you haven't already mentioned this to the problem player's character then this is what I'm thinking:
Remind the player that this is a group effort and, although staying in character is all well and good, if the character is not meshing well with the other characters then he's being more disruptive to the party, in and out of character.
Point him to the following passages (though they're usually for GM eyes only):
GameMastery Guide
pg 71: Antagonist
pg 74: Loner
I don't know if this player cares overly about these guidelines, though he seems to understand rules of a sort (i.e. staying in character). I imagine he really doesn't believe he's doing anything wrong. Unless you suspect he is intentionally being divisive I would assume positive intent in that regard. However, since he's playing a group environment he really DOES need to be aware of the ramifications of causing strife between characters and, by extension, their players.
You mentioned that you weren't very good at confrontation, but this is one area where you are going to have to step up. The other players see you as the 'leader' of the group and nothing destroys group cohesion faster than a leader that starts to lose the respect of his followers. If they are having a problem and they know that you are aware of it they will begin to resent the lack of resolution to this issue.
I hope the previous paragraph wasn't too harsh because I did not mean to be disrespectful, only direct. There is a very fine distinction between leading by the carrot and leading by the stick. Unfortunately some people, though they may not know it, actually respect being led by the stick (though most people assume everybody would prefer the carrot.)
Most of the comments and suggestion above actually mention various ways of removing this character from the party, but keeping the player. Please keep that in mind when you finally decide to speak to him about it. The general consensus here is coming from, probable, combined years of experience at these types of games. Though the majority may not always rule sometimes the consensus is the best way to determine what you should do.
I hope some of that helps, even if only a little.