Dude, listen here:
-being a rat won't help. Google/Yahoo/ MSN won't care. They only ban extremely OBVIOUS techniques, on NEW websites. They won't penalize an old, huge website, unless they have very good reasons to do so --- something he is doing ON HIS WEBSITE, not outside it - like spamming backlinks, etc... google do not deindex him for this.
-trying to get him down with xrumer and pr storm won't help. People GET BANNED using these tools, because THEY ARE USING THEM ON NEW domains and new websites. Applying them on an already established domain won't get him banned.
-Your only change? Be a man and admit that he is better than you and try to overcome him. Stop crying like a baby. This is business dude, and in a business where lots of money are made, there is no room for whitehat/blackhat delimitations. Whatever gets you to the top, that s it.