Agreed. It's not hard to tell how someone is feeling about their position. Your boss probably wants to find something for you that you'll be happy with as much as you do, the pain of losing someone good sucks, but it's worse watching them toil away unhappily for you.
This. I've only had to do this a few times in my life, but it always seemed worse than it was. Just be straightforward and honest, it'll all turn out just fine.
I once emailed my boss to say that I want to talk to him about some career choices I've made. When we finally spoke, he was mentally prepared for my resignation.
Ask your boss for a private meeting. Sit down. Chances are he'll glance at you and say "So where are you leaving to, then?"
Above all, don't stress about it. It's not as important as you seem to think.