Dear Trying to Tread Carefully…
Tell her. Communication has a better chance of preventing future tension. Imagine the awkwardness you’d have explaining the book suddenly popping up on another house’s list? She did take time and care to make revision suggestions, so thank her for sharing her ideas, then tell her you’re not ready to break away from your original vision yet and want to try the project elsewhere before you try changing it. Editors understand that happens. And she’s likely aware that you two aren’t connecting on this one, in which case she won’t be shocked. Be sure to include that you look forward to working with her on your other projects and, who knows, maybe this one, too. Editors know authors publish with many houses and she’s acknowledged that the project isn’t working for her yet, so the air should stay clear.