Cheshire,
Given the tone of your post, I am going to assume you consider yourself a heterosexual.
I think that would definitely put a strain on your friendship. I'd be very careful about the situation if you would like to continue being friends. Discuss it openly and honestly with your friend and decide between the two of you which way you would like the relationship to go.
As to the gay/bi thing....you guys are friggin' hilarious!! It's perfectly possible to enjoy the company of both males and females....classify it however you like...
Good Luck Cheshire.
(ps - and if this was only meant to give GFY a good stir...good one! haha)