OK.. this is just advice. Dont' blame me if it blows up in your face.
Be straight with her, but be nice about it. Tell her you're not interested in her that way. Just don't say the "I just want to be friends line". That's old and corny as hell. I'm sure her feelings will be hurt at first (who's wouldn't), but she'll get over it.
More importantly, don't be a dick about it. One thing I've learned is that women do talk. You might lose potential dates in the future if you get a bad reputation with the ladies.