Although it sounded like you were finished with this thread, and know what your going to do....I hope you don't mind the add from me....being a person previously in a 'friends with benefits' kind of relationship....

I dated a man for almost 3 years, the relationship ended abruptly and messy, I ended up moving out of state to get away from him and my feelings. Eventually I did find myself back in the same state and county, and he initiated contact with me via the internet. For a year and a half we became 'friends with benefits', although I didn't date anyone during this time, I understood that we were not going to have a relationship where it was just him and I. The problem was that I really still loved him and would pretend I was okay with the arrangement just to be with him, hear his voice or simply look into his eyes. But I also got mixed signals from him regarding us and our arrangement. The one that came up the most was that he loved me and couldn't stand to see or think of me with another person. At times he was drinking, and times he wasn't, but it always came down to he didn't remember saying things and I was left alone until the next time he got lonely.
The man im with now gave me the opportunity to get over him in my time. Helped me realize that I am worth more than where this other man put me in his life, at the bottom. I'm sure for alot of people, having a friend with benefits works for you, which if you can keep the emotional conflict out of the equation, then i'm sure it can. But for me, the emotions were there and i finally had to admit that it was causing me more harm than a good feeling once in a while.
So perhaps this woman that you have mentioned who has stated that she feels used, perhaps she cares more for you than she wishes to admit. I know with K, it was really difficult because when he would ignore me or blame me for something because he found someone else to play with, I felt used, and it hurts alot.
I don't mean to imply that you are doing anything remotely the same as with my 'friend', but perhaps if you really don't want a relationship with her, maybe it's time to cancel the benefits to keep her and/or yourself from getting hurt.