You have very limited options.
1. Ask him to make his son leave - not only will he probably not do this right at this moment, but if he did do it, he would probably resent you for forcing him to do it.
2. Deal with it - at least for the moment until he's ready to have the son leave. Avoid getting into any confrontations and basically avoid him. Not the most comfortable situation to be in, but you have to ask yourself if you should have waited a while longer before moving in.
3. Leave - or threaten to leave. Threatening to leave brings us back to number one, basically you would be forcing him to make a decision between you and his son. A position no one would like to find themselves in.
Unfortunately none of these choices are very appealing and/or comfortable. Nor does it seem that any of them would completely solve the problem. You might want to try a little of all of them, try to deal with the problem for now by avoiding the son and give him time to get him out, ask him to give you an approximate date on when he thinks his son will be leaving, and if he doesn't leave by that time, consider letting him know that you can't stay while his son is there or it's going to detrimentally affect your relationship. When he's ready to have his son leave, then you can talk about living together again.
Ultimately its your choice, and in this situation there doesn't seem to be an easy choice. I welcome your thoughts, let me know if you want to talk more.