Hi,
You can't stop having created orders. At least not with PayPal standard.
It is necessary to generate the order from the cart content before redirecting to the PayPal payment page.
Otherwise, if we were to create the order after the payment, it would mean that a customer could change something in his cart after the redirection to PayPal, and then, when HikaShop would be notified of the payment, it wouldn't be able to match the content of the cart with what the customer paid.
So the way it works is inherent to how PayPal standard's workflow is done.
If you want the order to be created after the payment to avoid having created orders, it's possible with payment plugins which gather the payment information of the customer during the checkout and process the transaction right after you click the "finish" button. For example, PayPal Pro, or Authorize.net in AIM mode work like that.
So it's not a short coming of HikaShop.
Now, if you click on the "cancel" button on PayPal's payment page, the order will be cancelled.
If that doesn't happen, it means that something was changed in the System>Order statuses menu leading to the system not being able to do it. For example, if you disable all the statuses under the "cancelled" column there, then the order status won't change.
There is no option to have an email sent to the customer when an order is cancelled. However, you can indeed disable the "order creation notification" if you don't want the customer to receive an email when the order is created.
Also, you have the "auto cancel" plugin you can configure in the Joomla plugins manager so that it will, thanks to the cron task, periodically cancel created orders that haven't been paid after a while.