Andy Budd has nailed it on the head in his post, 10 Bad Project Warning Signs .I've seen a few of those in my time (and in my naivety, took up the projects still). The best line to say to the clients still is "Price, Speed, Quality. Pick any two" which is also mentioned in the comments somewhere. Update: Another somewhat related article has caught my attention, titled "11 Clients You Need To Fire Right Now"

Warning signs that a project isn't worth taking up