Edited 6/27/09. My main intention in this post was to inform and help others in similar situations.
To any young designer, or any person running their own business, make ABSOLUTE certain of one thing: At the end, know EXACTLY how much you will be making in the deal. Never assume. Never estimate. And don't be afraid to say NO early in the beginning. Don't be afraid of making others unhappy. Definitely, get everything in writing (as one commenter mentioned). Just make careful decisions.
People probably think that fashion designers make a ton of money. But in reality, for the majority of us, that couldn't be farther from the truth. (even if we're one of the lucky ones that "makes it" so to speak.) We spend more than we bring in. We're lucky when we break even. And we're one of the select few if and when we turn a profit. I'm still not there yet.
Long Live Etsy: I'm a huge proponent of marketplaces where you can buy directly from the designer. It ensures the designer actually gets compensated for their work. I still realize I have so much to learn about this industry. And I'm learning, one mistake at a time.