Don't beat yourself up. Don't cheapen your name out in the marketplace. Don't even think about taking this on. You will be losing more than money.
Encourage those folks to go for it elsewhere. Not only do they not know quality, they don't appreciate it either. They are not your core customer if you want to be in the custom woodworking business.
Your customers are custom, too. Not the run of the mill who would buy that junk. Those folks failed to qualify to be your customers.
I certainly did! And I would repeat it, again and again.