i had two projects like this... old friends that pressured me into booking them... the first when i didn't really have the time and they didn't really have enough money...
with the first one, i told them we'd need more than 10 days to track the 12-song album of fairly complex death metal with keys and tricky solos, etc... but, they insisted. the main guy, my buddy, swore up and down that the drummer was totally ready, would take 2 days, etc et.blah blah.. and proceeded to do part of my job as producer by outlining the entire schedule (and he was very unrealistic with it). i felt very pressured, because of our friendship... but i accepted, knowing that that eventually they'd realize that we'd probably end up with only drums, rhythms, and maybe bass finished...
and that's exactly what happened... first, drums took 5 days because the drummer was totally not at all ready. i hired an assistant to help speed things up, but of course we ended the 10 days with drums done, keys done, rhythm guitars mostly done, one song on bass done and one song on vocals done. and since we put in 12-14 hour days i was able to say "i told you so" with no hesitation....
so far, this was ok, no complaints from the client.... the singer/guitarist was also playing bass for the session, so only he needed to return, and he booked it for several months later.... both to fit my schedule, and so he could earn the money to return. at the time i did not realize that he somehow felt he had paid me in full.... the money he was talking about raising was for his plane ticket.
well after several months the date approached, and the guy cancels because he's cut his finger nearly off with an electric saw at his work.... so, several more months pass and he's finally able to return... it's now been well over a year since we started. and i'm already starting to get the feeling from the guy, despite all my warnings to him to book more time at the start, that he somehow is blaming me.
he finally returns after his finger heals, and we complete the tracking. i advise him that, having waited this long for him to come back, that i haven't been sitting on any time for him... especially since he had decided he'd paid me enough, despite it was HIM and HIS band that used all the initial time and didn't finish... so he'd have to be patient as i would only be able to work on the mix during breaks in my already very full schedule. He grumbled quite a bit about this, and my suspicion was confirmed; he blamed me for the album not already being done, despite the fact that he had ignored my pleas for him to book more time, and he also felt that since he had booked his original session before my current workload, that he should take precedence over those projects... nevermind that all my current clients had booked enough time, finished their recordings on time, and paid full rate.... no, he was special, and should be treated so (or so he clearly believed).
of course it took some time to mix the album... one song at a time, here and there, between my booked sessions. finished it several months ago now... band still looking for label. it really came out great, and i think they deserve a deal.... but i surely learned some things about working for friends on that one; they believe, ALWAYS, that they are special and despite paying less than anyone else they are pushier and more demanding than anyone else... and in the case of this guy, he was totally unable to remember that he was the one to ignore my strong advice to book more time, and he had split his finger open causing another huge delay, on top of the one that he caused by not booking enough time to start with...
it didn't kill our friendship, but it came close.... getting the finished mix, and loving it, really calmed him down.. but he still has to be reminded of his two major fuck-ups regarding the scheduling of his recording each time we talk about the album. i'm a busy guy.... if you don't book enough time to start with, and don't pay attention to my advice on the schedule.... well, you may well have quite some time to wait.
the second example of this is still ongoing... it was originally booked right after the first band i just talked about. this band's main guy wanted desperately to book time before he had even written a note of music... i refused to book him at that time. so, he wrote the music and got one other guy, a guitarist, and asked me to find a session drummer. i found one, and we sent him the guy's demos. now he INSISTED on booking.... despite the fact that he had no lyrics and no SINGER!! i finally relented, because of our friendship... and not wanting him to piss his money away at a local yokel recording shack and end with a crappy product.
so we flew the drummer up and recorded all drums, keys, and guitars.... but now he had to find a singer and write vocal lines and lryics. this took him over a year to do... finally he did and within a couple months i had the time to book him for the vox sessions. as with the other band, i made it clear that i hadn't held on to any time for him while he searched for singers.... and that since i gave him a serious "buddy deal", i wasn't about to bump any currently booked work...
so i'm only just now about to be able to have the time to mix this... but again it will be a song or two at a time, in between my current, full-rate paying gigs with clients who follow my advice... lol. at least this guy is much calmer... but it's still a tough situation and i HATE being in it...
but no matter what i would NEVER have paid either of these guys to get someone else... if the remaining guy wants to do that, he can... but he doesn't want to. that's just as well, because if he did he'd be paying them himself.
joey, i think you know the right answer to your issue... but like i was, with the first guy especially, you feel beholden to them because of the friendship... and in your case, family ties. You need to point out to them that you did them an enormous favor, and that it caused you hardship, and that they can feel free to move on to someone else. That they expect you to pay for that option is spit in the face, and shows that they do not hold you in the same respect and regard that you held them by taking the project when you really didn't want to. there may be no avoiding their anger at this point... but they'll get over it.
the rub is that it's just a bad idea to give in to friendship/family pressure regarding your profession.. and discounts are a bad idea even if you aren't friends or related... i've learned my lessons on these issues finally.
best of luck