Here's what I say,

Hi XXX,

Thanks for sending XXX to me.  I really appreciate it.  However, the condition of the book (state conditions here) make the book unpostable, and I won't be able to repost it to PBS.  I'm asking for my credit back at this time.  As soon as I get my credit returned, I will mark this transaction as Resolved.

Thanks,

Mary

Just keep it simple and non-confrontational.  Mary's note is great, just insert something like (liquid damage & stains)...either or both make it unpostable.  If they question it, you can copy and past from the posting guidelines.

From the HELP documents, Book Condition Criteria for 'Swappability' at PBS:

Guidelines:                                                                                                                                       

Overall Condition:

• No damage at all from water or other liquid
• Not soiled
• No stains (exception for cookbooks--see below)
• No mold
• no highlighting, underlining or writing on text pages (exception for Textbooks/Workbooks and travel guidebooks --see below)

Thanks for sending this book to me.  I really appreciate it.  However, the water damage on page ## and staining and soiling on the page edges and cover make the book unpostable.  Per the postability condition guidelines in the Help Center there can be no amount of liquid damage, staining or soiling on the books swapped here. I am asking that my credit be returned. If you would like the book back, please send an additional credit to cover the postage. You can read the instructions for this situation in the Help Center Doc  A requestor says there is a problem with a book I sent!. As soon as I receive the credit I will mark the transaction followup as resolved.

Great recommendations from the folks above.  I also find it helpful to post a photo(s) of the damage on a free image site, like PhotoBucket, and include a link to the image(s) in my note to the sender, to enhance understanding of the problem ;-)