You already know this isn't appropriate. Trust your gut. Break it off.

Yes, you should. She has a right to know the truth. I've been in this situation before and ended up laughing with my ex's exgirlfriend over the bs he said about me. I let her figure him out for herself but when she reached out to ask me about somethings that seemed odd I told her truth. I wished she would've asked sooner. I didnt volunteer the info before she asked cause I figured she wouldn't believe me cause I was the exwife and he was lying to her but I should've given her a heads up and let her draw her own conclusion.