I've been there. I've done that. I have 14 medieval novels and some of those are up to version 22. You catch a typo. You fix it and reload everything. A few weeks later a friend catches a different typo. Fix, reload. The beauty of self-publishing is that you can do this. You can ensure your book is as perfect as possible. The down side is that your house starts to get cluttered with those older versions that you ordered.
First off, make sure your copyright page always clearly states exactly what the version number is. It will be a nightmare to handle this situation if you have a stack of books and have no idea which book is which version. You at least need to know what you're working with.
Second, make sure you keep a version document that tells you a summary of what you change in each version. That way you can scan that document and know exactly what the issues were with each one.
Now it's time for the judgment call. If it's just a typo or two, I would feel fine sending that book out to reviewers and readers. Even the Harry Potter books had typos in them. Most readers will tolerate 2-3 typos across a 300 page book.
However, if the error was more egregious, or you had typos showing up in every single chapter, that would be a book NOT to send to a reviewer or reader. You don't want a negative review complaining about your lack of editing to permanently get attached to your book.
If it was a truly flawed version, recycle it. Put it in that recycle bin and be happy that it'll turn into fresh paper for someone. Yes, it's a shame you paid money for that copy - but that's in the past now. We spend money on lots of foolish things. This at least was a step in the direction of your current better version. That old, bad copy could cause you harm if it was read. You are saving yourself lots of money by keeping it out of the public eye.
I know you're probably tempted to donate it - but remember that any donated copy could easily end up in the hands of someone who then posts comments on Amazon or other sites. You want to avoid that at all costs. It's just not worth the negative results.
Finally, if you're artistic, make something cool out of it! This way you preserve the usefulness of the book and ensure it won't ever be read :).
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