sorry, obviously I was not clear at all. You asked how to 'let go' of a friend and asked 'where to go from here' - and I was just saying you change how you see them. While you think of them as friend, it's hard because there's a tie that comes with the idea of 'friend'. I was saying that you change your perception of the relationship in order to change the situation. I was saying that you have to stop seeing them as a friend and remove them from your life. I didn't realise though that you were asking for actual specific things to say to them, so sorry about that.
In terms of practical, well, once you have decided that they are not your friend, then you just don't contact them. They aren't your friend.
But what you want is for them to not be your friend but - am I right in thinking you want no conflict or fallout in achieving that? If so, then I really think that what you want is unrealistic. If you want someone who has been a friend to not be a friend but just an acquaintance, how realistic is that do you think? It may be what you want - who seeks out conflict after all? but you've got bugger all chance of it working out that way.
imo, in order to get what you say you want - her not being an overbearing presence in your life - you are going to need to be willing to have it out and say what is making you unhappy but not in a thrash it out and make up way like before but in a this is it way - that you don't want to be friends but would appreciate civility when your paths happen to cross.
She's likely to be pissed off as hell and probably not willing to go along with that though.
If you're looking for a way to remove from your friendship circle someone who pisses you off but do it in a way that means they aren't angry with you and still remain nice if you happen across them, then I think that's probably not possible.