I would sell him simply because an unhappy player, especially one like Sanchez who has proved he is immature and disruptive, when things aren't going his way, isn't any good for the rest of the team.
Ideally it would be great for him to stay and sign a new contract but it's not going to happen.
Wenger is in a precarious position, but he has brought all this on himself and it's no coincidence that Sanchez, Ozil and Chamberlain, arguably our three best players, haven't signed new contracts.
This situation is nothing new.
It's happened before, and our best players will continue to leave for more ambitious clubs, as long as Wenger refuses to adequately strengthen with world class players.