I am late weighing in on this issue (as usual) but my opinion is that you should charge by the hour, especially when you don't know how much time a project will eat up. My experience is that everything takes longer than I thought it would on the front end, so charging by the hour is a safe way to ensure you won't end up doing work you don't get paid for, especially in a project of this magnitude.

If you already have a written contract, I don't see how you can legally get out of that, but if it's just verbal at this point then you need to get something in writing. I'm not a lawyer so I don't know about how the verbal agreement plays into that, although I believe verbal agreements can hold up in court.

Kelly