I just wrote a document for doing How much to Charge for Freelance SEO Services. I hope you appreciate my share and leave me some comments in the blog. You may view the latest post at http://www.iwebie.com/how-much-to-charge-for-freelance-seo-services I felt like writing this as this is discussed the most in almost all webmaster forums I have seen so far I may not be a 100 % right in my post but then, your comments would help me improve my comment.
My opinion is simple. It determines on what you can offer your client and how much he thinks thats worth. Every client should be different because they are after different goals.
I agree with Aaron Nimocks. If you correctly explain to a client the value of your service, the pricing should work itself out pretty normally. People are always looking for a bargain, so beware of low ball pricing.