Hello @David1978,
You have instant book turned on and Airbnb operates on a first come first served basis for guests, so whoever books first gets the date. If you want to be able to allow guests some time to think about making a reservation after they contact you then turn off instant book.
When hosts cancel a reservation they are warned that there may be penalties. Permanently blocked dates is one of the penalties. cancellations can be penalty free if the reason is one list in the extenuating circumstances in the article below. Wanting to get a different reservation instead isn't one of those reasons.
You're a new host and have the instant book that they like hosts to have so it may be worth contacting Airbnb support to plead your case.
Steve.