First of all, do you even want to do the song?
I'm not sure how to approach this but I really feel that this song needs to be left alone. Not every unoffensive secular song should be converted into a gospel song. There has to be over 100,000 already made gospel songs between gospel and CCM for you guys to choose from rather than to convert this song.
IMO, when you tell him you can't do the song be sure to highlight the good things about him. Stroke his ego a bit. No matter how you do this it's gonna hurt.