Good that you have a written contract!
That at least takes some of the guess work out.
Can I assume that this is a Work Made For Hire agreement? Or is this an advance against royalty agreement?
If the WFH then I feel any changes beyond the agreed upon 2 rounds should be charged for. How you charge (per change or an hourly rate) is up to you.
If you have a royalty agreement set up there is a squishier argument to be made for making all "needed" changes (but even then when working with a self-published author a "needed" change is somewhat subjective)
As to whether you are being taken advantage of -- even without seeing the details of the contract or the work you've completed I'd say yes, you are.
But getting taken advantage of on your first job is not uncommon in the illustration field. Especially picture book illustration for self-published authors.
There's a whole long business lecture in your question that SVS may already have video's, podcasts, or blog posts for. @Lee-White @Will-Terry @Jake-Parker, I'll leave it to you guys to point @tazzyartist to the resources you've already made available.
To answer your specific questions:
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Yes ask for payment. Changes that are requested to work that is outside the scope of the book itself (but are going to be used for promotion) If you are drawing, you should be getting paid.
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It sounds like you have already established when a given piece is "done", i.e. after two rounds of revisions. All you have to do is enforce this by refusing to do additional work after 2 rounds of revisions. If the client refuses to pay you then simply inform them that the copyright license only goes into effect once the terms of the contract have been met. That is AFTER you have been paid. Use of the work before that time constitutes "willful" copyright infringement on the part of the client.
BUT
In re-reading your message you say the author/client "sort of" agreed to the two rounds of revisions. Is this in writing anywhere? Better if it's in your contract. An alternative that is also enforceable is an e-mail exchange. Verbal will be almost impossible to enforce. In the absence of a written agreement you are (potentially) in a tough spot, because now the contract is open to interpretation. You feel the work is "done" and payment should be made after 2 rounds of revisions. By contrast, the client may feel the work is only "done" and payment should be made after the client is satisfied with the work. You are both "right". To decide who is more right might require arbitration.
- Yes you can limit the number of revisions and you should! Simply specify how revisions are handled in the contract. I break a project into three parts. Rough Sketch, Finished Sketch, Final Art.
I allow two rounds of revisions at rough sketch. These can be fairly significant revisions as I'm not spending much time on the drawings (hence the "rough" designation). Once a Rough has been approved I move on to Finished Sketch. This is a tighter drawing with all details finalized (no color). I allow one round of small changes at this stage. If the client doesn't like the drawing and wants to go in a different direction I go back to "Rough Sketch" stage and add an additional 1/3 - 1/2 the overall budget to the project fee. Once the Finished Sketch is approved I move on to final art. No changes are allowed at this stage. This makes sense as the client has approved two previous versions of the finished art. If a client REALLY wants to make a (minor) change to the final art I charge hourly.
If you don't yet have a copy go and get The Graphic Artist Guilds Pricing and Ethical Guidelines as it does a comprehensive job of covering standard business practices for the different niches of the illustration field.
