Considering you said you used to hang out with her as a friend when you were dating her friend, it seems pretty likely to me she asked you out just to hang out as a friend again. She probably realized you liked her and got kind of weirded out since she meant it to be just hanging out like old times.
I know this has happened to me, where I thought I was going to hang out with a guy as a friend, and he suddenly was trying to act all smooth. I felt like I was tricked into going on a date. She didn't really have any way to turn you down since you never asked her out, so she avoided you. I've been in the same situation myself... orz
Sorry if that seemed harsh, you seem like a nice guy, just giving my point of view.