I  got a WL request for a book.  I also got a PM from the sender that said basically, it was posted by mistake and could I cancel the transaction?

I have not done anything with the request yet.  I am the only wisher for this book.  I understand that if there was a line of wishers behind me, that if I canceled, I would go back to the end of the line.   

Should I click on "I do not want this book" and then put myself right back in the WL?  I don't want to use the "Not Now" option, because you never know, I actually may WANT the "not now" option for this book in the future and now can't use it- because you can only use this once per book.

Should I accept the book and tell the sender to click on that they cannot mail, which means they canceled the transaction in the end?

It is the responsibility of the person who posted the book to cancel the order.  On a wish list book, they have to accept your order, then cancel it.  Otherwise the order just keeps rolling over to the next person in line. 

You have to accept the offere first. The sender cannot cancel until after you've said you want the book.

What Cathy said -- you accept the offer, then she can decline. 

Obviously it seems that in this particular case there won't be any consequence if you decline, then re-request the book. If that makes you feel better, there won't  be any ramifications. But it seems to me that since she posted the book in error, she should be the one to cancel - just because it more accurately reflects what happened.

I say this as someone who has canceled more of my posted books than I care to think about it. I certainly sympathize with the poster for posting in error - I keep trying to avoid it, and yet it keeps happening to me. Nevertheless, I think it's fair if the system properly records my errors, so that the records reflect what I do well and what I don't do well.

Should I accept the book and tell the sender to click on that they cannot mail, which means they canceled the transaction in the end?

Yes. This is what you should do. They can't do anything until you do this.

If you do nothing at this point it will time out and look like you did not accept and remove the book from your Wish List.

What Melanie said.  You should accept the offer then notify the sender that she can now cancel the transaction.

Yes, you 'could' cancel it yourself in the instance.  But best to just train other members in the correct procedure.  She posted in error, it's up to her (and on her record) to cancel.