Well it is saying you have the option use the book if you want to give up, not if you want to pass the test. The book, iirc, is the one you are trying to understand the knowledge of, so it definitely has to be in your Key Items inventory or you could not be playing the puzzle. So you use it, and that will get you out of the puzzle, but it doesn't help you pass the puzzle.
If you need help with the puzzle, why not check out the walkthrough at the bottom of the first post of this thread? Just search for "puzzle" and the search function will get you there in the pdf quickly.