Aww, man. You said that any and all advice is welcome, so I'll start with the past. You should have done test at the earliest possible time, to protect the interests of your son AND the girl and future baby. Until paternity is determined--especially if they are not in a long-term supposedly monogamous relationship--he should share no parental expense. Doing so not only takes his money but also, kinda, binds him legally. Things really never should have gone this far. This isn't just on the woman. You all helped to get you to this point, by not dealing sooner with the obvious.
Okay, now, that said, it is NOT your job to tell him anything about his paternity. How and when this comes up is strictly between your son and this woman. Is your son willing to adopt him? That will give him more authority.
I think that, unless you are prepared to love him from the position of someone who will get little to no input in his life and be prepared to be pushed away at the mother's whim, you should start pulling back. Let him gradually get used to not having you around, and let her be a single mother. At some point, your son might get married and have his own children. This child will not be his firstborn (unless he adopts him), and that will cause all kinds of confusion and jealousy and resentment for the women and children involved.
ETA: That's what the therapist is supposed to do, call the appropriate authorities. I know that you just want to be nice and loving, but you are crossing a critical line and perpetuating the confusion and other foolishness. HE IS NOT YOURS. Even your son is willing to put space between this child and his family, if not cut ties altogether. He's not being mean; he's being practical and, likely, kind to this child by not letting him spend even more years thinking of him as family. Your son is opting to inject some clarity into the confusion, before it gets worse. He is drawing healthy and necessary boundaries in big, clear lines. You should follow your son's lead, since she has said that she doesn't want to relinquish parental rights. This is becoming a mess of your own creation, as long as you continue to be so involved. Sorry if this is harsh, but that's not your place. You are overstepping in this situation.