How much work you want to do also depends on how much free time you have, I think. As a student, I don't have the time, or even skills sometimes, to come up with designs for them, or to tweak a low quality version of theirs. Right now I just do pins for friends and student groups at my school and I ask for the final high-quality image for pins. I send them a button template along with instructions. If the art still needs adjustments, I send it back to them and let them know. The only part I play is putting the pins together. This also avoids the possibility of the customer pointing fingers at you claiming that you didn't fix their art "properly".
I think it's great to offer graphic design services for those who don't have access to it though =). You might want to considering establishing an "art set-up fee". Not as a clever way to take their money, but to compensate you for the time you spend adjusting their designs. I've seen silkscreening places do a flat fee, or charge by the hour (eg. $5 art set up fee, or up to $20 in art set up fees based on how much time is spent adjusting the art).