Yeah - It doesn't sound like you are going to get sacked.
Maybe you could ask for a 6m full time contract? Is that a possiblity?

I would word up an email - something along the lines of:
Just following up on this offer. I am very interested, but obviously given my news, it may not be reasonable of me to accept a permanent contract with the company.
I am very interested in full time work though as I really enjoy the work here, and I'm wondering if perhaps I can suggest a fixed term, full time contract. My suggestion would be 6m.

If you try something like this, at least you are going back with something, and he knows that you are serious about the job.

Good luck - I hope it works out!