I guess I had the whole goals thing all wrong...I must read my DR book again!

No, you didn't have it wrong... Michele does show examples of goals in the book that are illustrative of what you'd see if things were working out...

I'm only suggesting that instead of expecting certain things from someone else, that we have more control over ourselves, and if indeed the idea is for us to change first so that others change around us, then set goals that change ourselves.

Goals like "H wants to come home", obviously are the ultimate, but that's almost a given should there be reasons that H wants to come back home. Those "reasons" might be goals in themselves. For example, let's say H had enough of your negative critical world view. Then positive changes would be: "I won't be so critical and judgmental", "I'll be more positive about the world" and that creates a new you that H may wish to reconsider a relationship with.

So now I feel like he is going to settle for me because she is backing out. I don't know what to think or do anymore.

Hey... who really cares in what way his fantasy is falling apart... if it gets him to think about what he really wants... and time (and his actions) will tell what that is.

This is that "I don't want to be second choice" and the resulting slight that comes from it type thinking. It's nothing more than an attitude and I wouldn't put any more thought into it. Let me put it this way: If a girl has decided to be with me, sleep with me, share my life... then who's her first choice? I am. So, to me, my WAW being with her boyfriend, that's when I'm a second choice, not if she returns to me.