Under no circumstances you admit you are letting her go. Do what girls do.

Always be “busy”, cancel things because of family business etc.. do this a few times and she’ll get the message

I don't want to just block and delete because: a) we have mutual friends and I'll see her around anyway, and b) I might run out of options.

Don't assume you'll run out of options. Don't try and keep her around if you don't want to.

Just tell her that it's not working out for you, you don't think you're compatible, etc.

No blame, just "this isn't right for me".

Don't be baited or cornered into any sort of blame or "not hot enough", this will just trigger a massive hatred/backlash against you.

Why the fuck do you care?

Keep her on the back burner.

This means, minimal to no contact, but don't make it obvious.

b) I might run out of options

Gotta drop that scarcity mindset. You always have options.

“Hey I had a really good time last night but it made me realize that I’m really not ready to date right now. I’ve got some issues in my own life that I have to unpack and don’t want to lead you on and get your expectations up. I wish you all the best in the future. Take care.”

Just be a nice guy. Just act clingy and she will eventually hate you

Gradually reduce affection and attention, she will get the message.

Something like you are still attached to your ex and didn't realize.

Can't really argue that. Unless they know you well.

I've seen a girl recieving this from a guy and they took it well.

Could potentially leave the door open in future as well.

Why do you have to let her down, does she think she’s moving towards a relationship?

Slow Fade

relevant XKCD

You could try to let her down in a reasonable and nice way.

Just fade out of the picture and do your thing. truth is ugly and painful, learn to tell white lies i guess if you want to still have an open hole

If you talked enough with her there is at least something you can leverage to say "we're too different it seems" or disagree with a core principal she has repectfully and use that.

Gray rock and just be busy. Gives her the least reason to hate you and gives you the best chance of reconnecting in the future.