Welcome to the forum soulsearcher!
You get on well together but both realised, after about a year, that the relationship wasn't quite as it should have been.
You weren't communicating well, but were just together because you were together ~ rather than because you had shared interests or because it was simply a great relationship ~ and this was beginning to feel uncomfortable for both of you.
Having broken up, the communication has been given an opportunity to begin. He feels comfortable enough with you now ~ now that you shouldn't be jealous, because you are no longer his girlfriend ~ to tell you some of his innermost thoughts and concerns ~ the sort of things you might only share with a soul-mate, perhaps.
He didn't think that you were soul mates at the time. He felt that you weren't truly in love at the time ~ presumably because of the love he still has for this other girl. He hasn't got over the longing and the pain, yet ~ or at least the memory of it ~ even though he has had other girlfriends.
Since lack of communication seemed to be part of the problem, it is not surprising that you feel that these conversations are improving your relationship and could have done so earlier. And I think that it's good that you can both be happy to continue getting to know each other as friends ~ which is what you both seem to want at present.
But you still love him very much, and he wants to kiss and cuddle. Some might consider this to be him having his cake and eating it ~ but is he that type of person? Perhaps he just needs some comfort as he relives something that caused him a lot of pain.
You wrote:
'There is one point of confusion in this for me and that is even though we are no longer together he still wants to be affectionate with me (such as holding each other, kissing my back and arms). I brought up that this may mix-up emotions but he said he doesn't think it does. Still, I am a bit perplexed with his need to be that physically close especially since we seem to be meeting as often, if not more often then we did while we were together and as he is eager to keep doing so.'
I think that you need to raise this issue with him again. He may not think that it causes emotions to get mixed-up, but you quite obviously do. It is a 'point of confusion' and you are 'a bit perplexed'. He is opening up to you and you should be honest with him ~ it's not a case of 'this may [cause] mix-up emotions', it's a case of it already causing them ~ for you if not for him. Now is the time for honesty, I should think.
As you say, you both need to look at this matter objectively. Stand back from it and consider what you each want ~ separately and together.
For some people, there is a 'love of one's life'. Sometimes it's just a case of seeing the past through rose-tinted glasses. For others it is as it was ~ genuine and lasting love. Either way, it doesn't look as if this boy is going to get back with that girl. And, even if he could, he actually might not even like her any more.
He needs to try to be realistic about this. She didn't want to be with him. She didn't want the same things as him. She wasn't happy with their relationship. He might have loved her, but it is unlikely that he would have been happy with her.
He gets on well with you ~ well enough to open up about all this past 'trauma'. You love him. He feels comfortable hugging you, even while you are not his girlfriend. Maybe you are soul-mates after all. Maybe you are destined to be 'just friends' or long-time partners.
Keep talking it out honestly and you will probably find out which it is to be.
Good luck!
