Wow...except for the near blow-up/fight during your last ride, I could have almost written this post myself! I had the exact situation happen back in 2011 with a dear friend who lived in the same apt. complex. She had bought a bike but had always been a runner so knew nothing about cycling. So, I suggested we could ride a neighborhood loop I enjoyed riding after work, and she was thrilled. I was really looking forward to riding with a partner too, as DH is just too fast for me on this loop. This was a loop that took me exactly an hour to do on my Bike Friday. Some flats, some moderate hills, but nothing too tough or long. I rode it with her about four times, getting progressively more frustrated. She was on a mountain bike (with slick tires, though), and she must have always been riding in way too easy a gear, because she would spin and spin and not get anywhere. I was certainly no speed-demon, but riding with her, we'd be lucky to average 9-10 mph where I was used to averaging 13-14 on my own.

I also tried not to be intimidating, tried to keep it fun and social, and gave her a few pointers on shifting, gearing, and coasting (not!) etc., but we were making NO progress. Fortunately, the last couple months we were in town, she got very busy with other things after work (most noteably a new love) and was never able to get together for a ride, so I stopped asking her to come along. Although I missed the socializing and friendship, I was really relieved. It was so much more fun to ride solo at my own pace than to putter along and get frustrated that I was getting no workout whatsoever. She probably was relieved as well because she felt like she was slowing me down, and of course, she actually was, although I tried really hard not to make her feel like she was.

Let's face it, not everyone is well-matched as riding buddies, but I can certainly understand your wanting to keep the peace since you live so close, just like my friend and I did. In this case, maybe honesty is the best policy, though it's very hard to do. Unfortunately, though I can empathize fully with you, I am not sure what I would do either. In my case, we knew we were moving to Belize, so my situation was self-limiting and had no effect on the friendship whatsoever.

Good luck, whatever you decide to do/say. Moving is probably a bit too drastic.