I've been playing sax for about 20 years. I still have this problem. This is usually how I look at it. Most of the weddings I do are not for rich people. So I could charge too much and get passed over. Or I could charge something reasonable, and get paid $100 -- $200 for playing my sax for 2 hours. I look at how many songs I'll be playing, how far it is from my house (gas is up to $19 a gallon now). You will also have to ask yourself which is more important -- making a lot of money on one event, or getting referrals and working a lot. Personally, I always charge less than I probably could because if I overcharge I'd end up sitting at home doing nothing and making nothing.
Sometimes, if it's a person that I know personally, I'll ask them what they can honestly afford. As long as I'm compensated for my gas and time, I'm usually okay.
Hope this helps.