1) Do people like buying sketches/pencil art? Or do they prefer more "finished" looking pieces? (markers, b/w inks, colored pencils)
Sometimes it varies. There are some that appear once in a blue moon that will pay top dollar for quality art, but most will only pay the cheapest possible.
2) Should I collect the payment before or after I finish the picture?
I tend to take 50% of the agreed price. If they don't have change or whatever, you can ask them to leave something that they might want back.
At A-kon when I took a commission to draw a Naruto character and I ended up keeping the girl's digital camera (because it had a pic of the character).
3) Are there people who stay around and watch you draw their picture, even if it takes 30 minutes?
Yep, and I can't get used to that. It helps if you can keep a conversation while drawing.
4) What kind of information should I put on "Taking Commissions" sign?
Prices, some examples, and a policy on adult work.
5) Has anyone ever turned away a request before? And why?
At A-kon I talked to a fantasy artist that was in the same line of tables as me and he has mentioned turning down adult comissions (except for tasteful nudes, I presume) because that sort of stuff could haunt one's career for a long time.
6) Do people actually bring references to their OC's and even their favorite anime character?
Yeah, but it has only happened to me a few times. I once did a comission for a D&D character, and the guy only told me the class, race and what not.
7) If someone really wants a commish, and you think you won't be able to finish by the end of the con, what options can you offer?
Look up at the other responses.
8 ) On average what do most people request?
9) What prices do you charge for your commissions?
I start at $10. Will go higher depending on how much detail, items, and size of work.
10) What if you worked really hard on a picture, and the person doesn't like and wants his/her money back? What do you do? XD
Will re-do it.