>Something was going to happen, and that shockwave was both a feeling of anticipation and panic. But he broke eye contact looking down and then saying good bye. I acted normal as well and we parted.
When I read that I was like "WTF IS WRONG WITH YOU!? D:"
But then I realized I had that kind of paralysis before.
I agree, your story is very cute and you describe it very well :)
This guy probably likes you, but I'd say he's looking for hints and is probably as scared as you to make a wrong move. I could be wrong but that's how I read his comportment (guy here btw).
I say, next time... YOU initiate the hug. If he doesn't want you to, he'll make it so it won't happen after that; but the fact he did it before should allow you to make it guilt-freely. Just try to overcome that rush of blood when you stare at him. It's like bungee-jump: a step forward and then things sort of happen on their own. You just have to force yourself through that step...
Oh, and see how that girl was touching his arm and such? You say it doesn't feel right and natural, and you might be right, but the thing is (fact) physical contact is something you build up and get used to; and it's a way to build attraction. A strong one, that is. And you must take care because is that does disturb you but not her, she has an edge on you... so work on that!