We had a singer who had pitch issues. We did everything we could for him (spending one on one time going over the vocal lines, bought an extra set of monitors so he could hear himself better, etc.) but in 9 months things didn't improve and we had to fire him. Well, I had to fire him - I always get the dubious distinction of firing people from the band.
Anyhow, I'd recommend that you talk to the other band members (or at least the most influential ones) and, if they agree that your singers sucks, do the following:
1. Have the whole band sit down with the singer and talk to him about the situation. As best as possible, try not to make it an "us vs. him" confrontation, try to focus on the problem (his singing) not him personally. Don't insult, don't chide, don't run through a litany of complaints. Even if he starts calling everyone in the band as&*%& mother&%#$@, maintain your professionalism. It will almost certainly go badly, but at least do your best to maintain your professionalism and don't allow it to become a shouting match.
2. Make sure everyone int eh band is present when you confront him, but designate only one person to speak to him on behalf of the other members to avoid him feeling like everyone is ganging up on him. If other band members start shouting with him, ask them to chill out and save the shouting for later and stay on point.
3. Stress how much you think he's a great person once the microphone is off, and how hard it is to have to let him go, but everyone else in the band agrees and while you're sorry to do it, and don't want to hurt him, you don't have any choice.
4. Tell outsiders that the split is due to "mutual agreement" to help him save face publicly. No one outside of the band has to know that he was fired bc he sucks - that's your business, not theirs. Of course, the fired singer can bad mouth the band all he wants, do not respond in kind. Take the high road, be gracious and simply stick with the "mutual agreement" story to everyone outside of the band.
5. Get ready for a long time without a vocalist (unless you've got one waiting in the wings). What changes will have to be made musically? What gigs will you have to cancel? How are you going to search for a new singer? Craigslist? What is your audition criteria?
Anyhow, whatever you decide, it's not about firing a guy - it's really about what's best for the band.
Good luck - peace!