I think that if the overall impression is that the demand for domain names is down, the client should be informed so he won't expect much if anything to come out of this. If my feeling about this type of market is wrong, I need to know that too. If any specific companies are mentioned, I'd prefer to have that on sticky. Thanks.
2 - There are also a few niche sites that specialize in selling whole companies. But I would bet on the big guys and all their eyes. Try a search engine like Google if you want to find those companies or perhpas DMOZ has a listing of it.
3 - ouch, The market is tight right now. I would set his hopes low. Perhaps wait 2 years and sell in better times. I would say 1/3 the price I used to get in now common.