@Claus20
If you do decide to continue with Airbnb, you need to select the setting which only allows people to book if they have uploaded a profile photo. I believe this applies to both instant bookings and request bookings, so is not under the IB settings. Go to your listing as if to edit it and click on Policies and Rules. Scroll down and you will find it under Guest Requirements.
It seems to work for me as I have never had a guest without a profile photo book since I turned that on. That's not to say their profile photo won't be unclear, or of their dog or foot or whatever. In the latter case, I would ask the guest to upload a proper photo. In your case, I would also ask the guest to upload a photo and properly fill in their profile, get their ID verified etc. Ask for the names of all guests on the booking and for the guests to confirm they have all read, understood and agree to your house rules.
Ideally, you would do that before they book but you are using instant booking. On that subject, if you want to be able to accept or decline reservations and are choosy about who you host, then really I would advise turning off IB unless you feel you absolutely need it to be visible in the search results.
I am not sure why you are so wary of these guests. Is it because they are students or because they will be working as cleaning ladies? Their response seems perfectly nice to me but I understand you are unhappy with the price and I have no answer RE that. Many guests do not upload a profile picture because it's not required to create a profile (Airbnb's fault) and they just want to do it quickly and get on with other things.
I have also hosted lots of guests with no reviews and most of them were nicer than some guests who had lots of great reviews. Everyone has to start somewhere. I assume even if you have never been a new Airbnb guest, you have been a new Airbnb host and someone has to take a risk on being your first guest. I believe you just have to ask guests for enough information to make you feel comfortable with the booking as they don't always know that the host expects this or what they should tell you about themselves.
However, if you do want to go ahead and cancel the booking, of course that is your choice, and I have no way of knowing for sure if these are going to be good guests or not. I don't know why it is only showing the option to change rather than cancel the reservation. There must be a glitch (I checked and am also not seeing the option to cancel), so I guess you will need to contact Airbnb about it.
Also, here you can read about the circumstances in which you can cancel penalty free: https://www.airbnb.co.uk/help/article/2022/can-a-host-cancel-a-reservation-without-adverse-consequen...