Do you want to walk away from it, or try to complete it? Your post doesn't seem to say, so I'm not sure, but it does sound like a bad situation where it may be in everyone's best interests to move on.

Don't obsess about the time you spent on it. It is a sunk cost; try not to let it bias you against the best course moving forward. Instead you might consider:

1) How much deposit did they make? Can you afford to walk away and return this amount?

2) What is the best case scenario if you proceed? $10k is a lot (although not that much if this is a 250-hour project) but are they likely to pay it? Without a contract?

3) What is the worst case scenario if you stop the project? Are you incorporated, in case this comes to legal action? Feel free to ask a lawyer for a free consultation to find out more.