Yes,  most definitely cancel but as your reason, tick something like problem with buyer's address.

Your  other option would be to message the buyer and say these cannot go via post, do you still want to go ahead with pick up or would you like me to cancel? Then you could put buyer request for cancellation as the reason. If no response to message, go with problem with address.

If you use those reasons, you won't be charged the ebay selling fees but if you say it was your idea to cancel, you'll be charged fees. 

If you relist, maybe pit PICK UP ONLY in the title (at the end). Your titles all seem reasonably short so it should fit & buyers couldn't claim they didn't see it.

Maybe also in the description put Pick up only, no postage on this item, at the end. Might help avoid requests and wasted time.