If you're not feeling it, then you got to let her know. You can't drag it out just because you're afraid of hurting her feelings. The longer you take, the more it'll hurt her. I'm thinking the amount of time you spend together and the amount that you talk, on top of sex which most see as an intimate thing, it's probably why she thinks theres more. Just let her down gently. Be honest. Be straightforward. Explain yourself and your feelings. Try to salvage the friendship if you want it. Most importantly, accept the outcome, whether it be a continued friendship or her cutting all ties with you.
Have a good long think about everything first. Maybe you'll even find that might want a relationship with her. Maybe that type of commitment could be good for you.
But again, if not, it's better to clear things up sooner rather than later.