One of the areas I attempt to consistently nail down in my business (not luthiery) is making sure the customer's expectation are reasonable....and that the results that I can provide can meet those expectations. If these two gears don't go together well...we don't have a deal...period. Occasionally I'll get a customer that somehow manages to slip out from under that sheet.
I realize that this family just simply wants to have a playable guitar for their kid but.....in some cases, speaking in generic terms although we are speaking of guitars here, even the smallest expectations can be made harder to meet when the starting point is below what normal public expectations hover around.
I'd call them...maybe go over...maybe invite them over....and gently explain their expectations BACK to them. My guess is that if you are going to have to do a setup and fret dress you should be over 150 dollars. I'm not assuming your pricing for you here, only stating my thoughts. For that same 150 they can find, with a little hunting on their part, a better guitar that is likely set up better for the kid to play...one that will last him longer...one that will sound better...one that's easier to learn on....etc. You get the drift. Craigslist?...Pawn Shops? If they still want you to set that guitar up...then set it up.
Now...on to the giving of one's self issue. As Yoda would say, "
I sense in you...a great disturbance...look further...you must.
Dude this is simple...if you have of yourself to give, and this assumes you are all squared away at home cuz that's where giving starts....then give freely and willingly. If you don't...then do not...and do not feel around about it. We are all placed into our lives by our choices...not placed into our lives by a pecking order. Seeing kids attempt hard things can play on your inside strings.
In short....square it up....find a way....talk to them more...talk to other people. Just make sure you are good at home before you are good elsewhere.