1) It sounds like you're doing all the work. Your "co-founder" - what is he doing?
2) Oh that's right - he's doing his other business - presumably the one that pays your income. How did that arrangement work out? Are you an employee of that business?
3) This sounds like a way to get royally screwed. Let's say you make the product, it turns out to be a success. Your friend can say that its IP of his company - that you were just an employee - or worse, you were a contractor. When you worked on that project, what agreement did you sign? Is there something there that says "any work derived by contractor as part of this project becomes IP of Company"?
4) This sounds like the classic, "I have a great idea, here, you develop it, and i'll give you no income and 5% when it's all done" scheme.
5) A demo is good, but it should not be an end all be-all for funding. The best ideas are the ones that leap off the paper. If you need more motivation/funding - there a dozen groups like Ycombinator now. Don't quit at just them. A true entrepreneur never quits!
6) Don't be an architecture astronaut. There's no point re-designing everything when you don't have a paying customers. Put stuff together, slap it with duct tape, whatever. You don't get users if it's just sitting in a github repository. If your site experiences growing pains, that's a GOOD thing.
7) I would cut bait and run, but make sure you pay your landlord back. It seems like he's extending a lot of faith in you by letting you be 2 months behind in your rent. Don't screw him.
8) Get a real job, and gain a savings cushion. This market that your targetting is full of consultants/hipsters/experts that are probably making a decent stream of cash. This will also help you generate buzz for your project when it's all said and done.