Here is my custom order policy from my shop:
"I would be delighted to do custom orders and I am very flexible. I have a wide range of colors of yarn, and hundreds of patterns to choose from. When discussing the custom order I will send you as many pictures of finished products that I think will fit what you are looking for, and will make sure each detail is to your liking. I will send you a quote and reserve you a listing in my shop. I will not start working until it has been paid for in full (This helps me charge you my going rate for all products in my shop, and protects me from losing out on my investment).
A final picture will be sent upon completing your custom order where we can change anything that isn't to your liking. Once shipped, custom orders cannot be returned or exchanged."
Here's a link to a discussion I started Saturday night on this topic as well, has a lot of good ideas to check out.
http://www.etsy.com/teams/5002/etsy-success/discuss/6858876/