Where can I safely sell a Casascius version 1 physical bitcoin (with hologram error) for cash?
There is a fairly robust market for these on ebay.  One sells every few days.  I have bought several from ebay with no problems (except for my underperforming post office).

PayPal is a little frustrating but you get used to it.

Be sure to post a good quality photo of the hologram and clearly describe the that it is a V1 error coin.