>That reluctance is a serious flaw in a general.
Agreed. But regarding your other point, it was actually the official position of the federal government (Union) that the South was still a part of the union, and that the confederate government was illegitimate and in rebellion. So, still fellow countrymen. And I imagine he still admired Lee greatly, many did.
The slaughter McClellan was concerned about, and the source of his timidity, was that of his own men. That Grant & Meade had no such compunction is precisely why Lincoln turned to them. The Union victory then became a simple matter of attrition and its willingness to bleed.
Yes, they were his fellow countrymen in a sense, but they had declared themselves to be another country and were, in fact, his enemies. That reluctance is a serious flaw in a general.