1) NEVER accept a guest's request to cancel THEIR booking after it has been confirmed. I recently had just such a situation and the guest tried to assure me he was very well versed in all things Airbnb, and it would cost me nothing. Feeling more than uncertain, and relatively new to Airbnb, I contacted customer support directly and confirmed that I would indeed be the one charged, the guest would be financially saved from his poor planning, and it would affect my overall rating/ranking/approval..whatever, in the process. I was able to get the CSR to waive the nonrefundable cancellation portion that I was entitled to (did this as a courtesy to the guest that he really did not deserve), but it took me plenty of time to make this happen. Avoiding this in future by asking the questions the guest should have in the first place.
2) STAY AWAY FROM INSTANT BOOK. You have virtually no guest vetting or cancellation control beyond back-peddaling, and such circumstances will only result in a mess. Do the up-front work of a 24hr request, screen the guests with whatever questions you need to (you will have history in the dialogue that way as well) and decline a guest request if you feel at all uncomfortable. I'm about to do that in the next 10 minutes as a guest with only one review on her (an unfavourable one, but I was giving her benefit of doubt...Hosts aren't always perfect) elected to disregard specific questions I had asked of her before I would accept her request. She was either lazy and didn't read my note, or conveniently skipped over the pertinent information request. In either case the result comes down to the same...declining as we are uncomfortable with this booking request.
I will always take decline in ranking, or the potential loss of some 'gold star' status that amounts to very little anyway, over an undesirable staying in my home.