Well, if you accept the offer the book will no longer be available. So, at the very least you should let them know that you are no longer seeking representation for that MS.
Depending on the credibility of the publisher, you should probably contact folks with notice of the offer once you receive it. (Not all small presses are created equal. Some will have more appeal to an agent even if they are not getting anything from the deal, especially if you have other books in the hopper that they could take elsewhere. [Not sequels, but other quality MSs.])
It's not recommended to shop a MS to agents and editors at the same time. Even if it's just one editor. Because starting with a small press is not usually the way an agent would do it. (You want to start with the folks with the most money and work your way down. Because the temptation to take the current offer is always strong. That doesn't mean a bigger publisher would make an offer, but if you start small you'll never know if you settled for a lesser deal just because it was the one you got first.)
However, whether or not you try and see if an agent is interested in negotiating this small publisher offer, you should let anyone you queried but haven't heard back from know if the MS is no longer available, just to be polite.