I think the two of you should probably take a deep breath and have a nice long adult conversation, sans flirting and such. You are at the age where you (both) are probably realizing you are not getting any younger. If you let your heads get in the way, and you walk away from this, don't come crying to me in ~ 15 years, saying, "What if we had only _____." Realize this, you are in for a ready made family. However, they are also already family, so,,,,,
As long as you are in friendly environs, (check the main page for state laws, I'm ASS U ME ing you both are here in the States) I would say proceed with all due care as you would any other relationship. Be advised though, the cousin thing is want to be intense, and don't be surprised to finish each others sentences and know exactly what the other is thinking. That can be the case, and yes it is scary if you don't recognize it up front. Being a bachelor, if you look in her eyes and see your soul, you will know.
I am curious as to why you feel walking away is the right thing. Is there a lot of drama on her part, (and don't beat me up here girls and mothers) other than the normal woman/mother drama? Or is it based on your perception of how the family will react? Is you hesitancy a result of a fear of loosing your "freedom" as a single man?
If you do not want to walk away from this, then don't. The "gut" reaction is usually the right one. If you are down deep feeling like this is something you have never felt before, then you are probably right in wanting more. There are no guarantees in life. Cousins are human too, and sometimes it doesn't work out. But if you don't find out now whether it will work or not, you may find yourself in the untenable position later of being in relationships, and then deciding, "Oh, hey, we should be together." Then you are looking at four people being hurt as opposed to two......