Single_chap, I feel for you. I hate when people do the lots of physical contact thing and then say they want to be friends. Talk about mixed messages!! People who are 'just friends' DON'T have lots of physical contact.
As she's been firm in wanting to be friends only, I think you need to work out what you want. You've really got 2 choices:
1. have her as a girlfriend (and not accept anything less)
2. have her as a friend and endure unrequited love
Now the latter reeks of masochism - so if it were me - I'd go for the former. In your situation, I'd tell her that being just friends is too painful for me and that I need to cease contact in order to recover. If she's upset about missing you as a friend, tell her that she can have you in her life if she will be your girlfriend...but that if she doesn't want a relationship then she needs to understand that you need time to forget her.
Unfortunately, no matter what you choose it's going to be painful. Unless she changes her mind about being a girlfriend when faced with the thought of losing you.
Never regret anything that has happened in your life. It cannot be changed, forgotten or undone. So, take it as a lesson learned and move on.