How can I deal with this the right way?

[MustacheFart]

I'm probably considered "often a problem" myself so, I don't know how much help I can be, but maybe I can provide some ensight from his point of view.

It sounds like he doesn't want to play a character with an overt weakness. By weakness I mean pretty much RP-wise but mechanic-wise too. From what you've said, you have designed a city campaign in which multiple factions are trying to take control and you want each player to have a stake in a specific faction. I'm not sure if that's true, it's just what I perceived from your post. If said campaign plot requirement is true, perhaps he just didn't want to align himself with any one faction. Maybe he's afraid that to do so, opens up the possibility that he ends up on a losing one (nobody likes to lose lol).

It sounds like he enjoys playing a neutral pervayor of knowledge of whom is badass independent of the group. Obviously, this can cause a problem with group cohesion and plot fluidity. Of course like I said, I'm just going off what I perceived.

Nevertheless, this isn't about whether his character fits into the world or not, it's about him playing a character you don't want him to play.

I agree with the above poster. I specifically agree with the suggestion that you two sit down together and build a character you both like.

I wonder though, when he has played his "gallery" characters in the past, was he, for all intents and purposes, the most powerful/cheesy/whatever-you-want-to-call-it of the group?

The reason I ask is, no offense, but he sounds like an attention-whore when he plays DnD. Often enough, people who desire "extra" attention will go out of their way to get it, resorting to shenanigans or causing trouble even if the attention is negative as to them any attention is good. I think this has a real application to DnD. After all, who among us hasn't enjoyed "stirring the pot" ocassionally?

Unfortunately, if I am right, there is only one forseeable way to handle it. Get tough! Tell him that such a character while a unique idea, simply WILL NOT fit into your campaign. Then tell him if need be, that if he doesn't like it he'll have to either deal with it or not play. Trust me man, if he's a real good friend like you say he is (confidante and all) he's not going to hold it against you.

I've played with and under one of my best buds and he has had to tell me flat-out NO! many a times lol. I never hold it against him. In fact I usually figure that I had it coming lol but that's because I'm a ****-disturber lol.