On a surface level, I don't really get the etiquette dilemma here. I don't think one is obligated to add anyone as a Facebook friend, for any reason.
Now, will not adding someone hurt their feelings/affect the relationship? That is certainly possible, but not necessarily rude. Ways around that include just letting the friend request sit there ignored and claiming you never saw it; adding them but reducing their level of access to zero; telling them you have a policy of not adding X group or that you only use Facebook for Y purpose, which isn't relevant to them.
If we are talking something like, you don't want to friend someone because you think they will use the access inappropriately, or you don't want to refuse because you think they'll physically harm someone in retaliation, we are getting into a whole weird, extreme area that etiquette is not equipped for. In that case maybe add them but reduce access, and meanwhile work on ending the situation, because the Facebook thing is just a symptom of something larger, and whatever you do re: Facebook will not really solve anything.