Pete Best, anyone? Chad Channing? Bands move on.
I think the band have to realise that the music business is just that - a business. If they're going to stand a chance of realising their ambitions then sometimes hard decisions have to be made. The current bassist has had a year to get up to speed and improve as a player and has failed to do this and from what the OP says he seems blind to his faults and so is unlikely to further improve even under threat of a sacking.
The band need to stop arsing about and take control of the situation.
The only people who should feel sh*tty about this situation is the band themselves. They seem to have hired someone on the basis of being somebody's mate rather than playing ability. That's fine if you just want to have a laugh and play a few tunes down the Red Lion once a month but for a band doing albums and tours, it's daft.
If I was in the OP's position, I wouldn't like to rehearse with the band until the issue is fully resolved. It isn't his problem and he shouldn't be put in any awkward situations. If the OP can't learn the material in time because of a tight schedule then they may have to cancel a show or two or get a pro dep in. Hopefully, it will be a lesson learned.
I'd just sit it out and wait and see what happens and make no commitment until I'd been assured that the previous guy was out of the picture. I wouldn't feel bad about taking the guy's place either. He had the opportunity but didn't grasp it. Maybe you will.