"The downside is that they might say "yes", in which case they may expect higher quality for the price that you put forward."
I have seen this in action at big outsourcing firms. It has almost always results is poor relations afterwards.
Right, that's because charging a really high fee for something that you don't know how to do puts you in the "dishonest" category very easily. Rarely do you want to pay some contractors to learn on your dime.
Hell, if someone is going to pay me to learn something new, I don't normally charge them EXTRA for the privilege.
That's the passive-aggressive way.
If you're not ideally suited to something, refer someone who is. I've wasted alot of time dealing with vendors who played these sorts of stupid games -- it's really frustrating, and lowers my overall opinion of the vendor.
The other downside is spending 25% of your engineering time over the next two years supporting a high-profile client with requirements that vastly exceed all your other clients. It's an easy way to get spread very thin.
What I like to do is put a number at about double what I consider it to be worth. This basically reflects the fact that I'd be spending weekends working, but also isn't so high as to be insulting - we're not talking huge numbers here.
The upside is they might say "yes", in which case you're getting what you consider a good rate for your time.
The downside is that they might say "yes", in which case they may expect higher quality for the price that you put forward.
This is also troublesome if you don't know the going rate, and unintentionally put a low-ball offer in.
Clearly if you want to just say "no", and have no interest whatsoever, then telling the client "no... but" is probably a better option.