If you're new to hosting, meaning you don't have many reviews yet: yes, refund, making sure they cancel. (*they* *cancel*).
Because that's what's happening: they are changing their minds and are cancelling the booking. Make sure it's not you who's cancelling on the site because then you get penalized. And make sure it's a cancellation and not a change in booking duration because then they still get to leave a review.
No need for the resolution center either: ask they cancel and offer to refund more than the policy. Possibly charge them at least one night. (You have a 'moderate' policy set which I think is the best one, and according to this policy they'd have to pay for the first night at least, and then get a 50% refund for the remaining days. You could offer to refund 100% of the remaining days which would be extremely generous. Or make it conditional: refund them according to policy, but tell them that if you get another guest for the same days then you'll refund more.
Crucially: when the guest cancels they don't get to leave a review, so you don't have to worry about that. And then you're holding the cards in terms of how much to refund; I'd be inclined to refund a bit more than by the policy but that's up to you.
To be honest those people sound like they should just book the nearest Courtyard hotel and forget about AirBnB for the rest of their lifetime.