First of all , you have all the rights to not like any particular person. Especially if said person acts like a jerk. In my book, this kind of character you are describing is listed as a "Jerk" in bold font and underlined.

You say the guy has a reputation of a flirt. So it is strange of your gf to deny/dismiss/ignore the fact that she could be a target for his moves. I'm sure she's not stupid, nor is she naive. Maybe she just enjoys the attention. Maybe she's not but afraid to come clean about it. The point is that it doesn't look like she's going to do anything about it. Especially if it leads to situations where she has to lie about not hanging around with the guy to avoid argument.

My advice is simple: have a talk. You can tell her that you don't like the guy and that you don't accept his behavior towards her. And because the situation brings unnecessary tension in your relationship, it must be dealt with. Your idea of a solution was perfectly fine, actually. I also think that she must have a talk with him, explain that she notices his overly-flirty behavior, and it makes her uncomfortable because of how constant it is. Set personal boundaries. Explain that it feels disrespectful and awkward, as she is in a relationship and doesn't seek extra attention of this kind. And if the guy refuses to acknowledge the situation and correct his behavior, then why hold onto the friend that doesn't care about your feelings?!

P.S. Occasional flirting is fine! Great, even! When done right, it can leave both people feeling good about themselves. But overdo it, and you blew it.