In the end, I did what the etiquette books say is extremely rude and should be avoided at all costs: I told him the truth. I explained that I appreciated the thought but would like the item exchanged for something else. Why should people be forced to keep items they don't want? I think re-gifting is just as bad an "etiquette sin" as being honest. And besides, don't most people buy gifts with the intention of making the other person happy?
So please, if there's any doubt the person may not like the gift you've selected, include the gift receipt.