If you dont want to be with her, tell her straight but in a considerate way ie tell her how you feel and do it in private, not in the middle of a pub or suchlike. If you want support, ask a friend to be there with the 2 of you.
If you string her along or treat her badly, people who know you and/or her will disrespect you for being mean and gutless. Its not easy to live that kind of image down, its always there in the back of peoples minds, as well as your own!
From her point of view, its better to be told it is going wrong than to find out months along the line that someone has been stringing her along like a fool, while bitching about her to anyone who will listen (how would you feel?). It would be even worse if you string her along as a handy lay while looking for something better, though realise this may not be what you are doing at all.
Whatever you do, leave her some self esteem and pride. It won't really cost you anything and you will be a better person for it.
Even if your situation is difficult (and these things can be truly painful for all) deal with things in the most decent way you can. Treat her how you would wish to be treated yourself in the same situation.