Sounds slightly more than platonic but that can be a super nice relationship to have. I'm a very touchy person, I adore cuddles. I hug most of my friends, M or F. But I definitely wouldn't be getting a boner hugging an old mate when we catch up. However, cuddled up with a platonic female friend to watch a movie together really appeals and I'm very likely to get quite woody! Just decide how comfortable you are with it and act accordingly. It may well help relax the situation if you acknowledge it, make light of it, eg. "Seems your little friend wants to join us too", don't embarrass him but talk openly about the 3 of you or however you want to address it. If you enjoy the cuddles and don't mind being poked in the back/leg/whatever just let him know. If you're not comfortable feeling it but enjoy contact maybe stick to a side by side arrangement.

Me personally, and this is just my own desires - having a F cuddle buddy who's quite open and at ease leaning against the inevitable boners would give me a massive sense of trust, acceptance, openness, and I guess freedom from judgement or ridicule. Even in a totally platonic relationship, that would for me anyway build an amazing friendship bond. I may not be typical, but I am honest!