I'd say get rid of him, or find another band. There are decent guitarists out there...they're a rarity, but persevere!
I put up with a similar bloke in my old band...I'm sure I've mentioned this many times here on the forum before, but he really was a git. Rarely bothered to learn anyone else's songs, constantly widdling away over everyone else, his tone gave me a headache after about twenty minutes...I put up being in a band with him (or bands, as every time we had a name change/got a new member it was entirely different thing, apparently ) for about a year and a half. Now though, I'm happily in a band where I sometimes actually have to encourage the guitarist to come out a bit more - he has respect for the other members and is happy to listen to our input.
The moral of the story; things will eventually balance out and you'll get a decent guitar player. Either that, or chin the sod and hope that sets him right