The two being honest about it would end up badly for Setsuna either way. If they were honest before Setsuna confessed, they would be a couple and Setsuna would be heartbroken. What we are getting now is the after confession scenario. If Setsuna wants the three of them together, there is simply no way for that to happen in their current situation.
Haruki clearly said this episode that he thought he absolutely had NO chance with Touma. They were blurting out their true feelings at that point, so he was not lying about that.
I think Setsuna knows the situation all too well. She knows Touma still likes Haruki, and that Haruki still likes Touma. That is why there are many scenes of her looking sad or guilty. My choice of words may be too harsh when I said malice (though I did not equate it to Setsuna's actions, it may have been read as so). The intention was not to harm them (though she knew it was going to happen, seeing as she apologized to Touma a lot) but to prioritize herself at the expense of the other two, which isn't wrong, but isn't admirable either.
I guess to summarize, I just want to say that I think the fault lies more on the party with more knowledge before taking action/inaction. If Haruki had known that Touma likes him (even just a little), I'm sure he would have turned down Setsuna's confession. He practically said so himself this episode.