I would be wary of doing therapy in a coffee shop, definitely blurring boundaries, along with continuing to hug if you find it arousing. Your experience is normal, but the way he's handling it concerns me. I don't think it's best for you to fuel the arousal as it can't lead anywhere positive and dealing with traumatic memories in that space where hormones are up can really lead to problems, I found in my experience.

Perhaps there is another, non-physical way for you to take comfort from his presence that will not cross into this grey area right now?