Cat,
I would bid it as a fixed price job. Figure out what your total costs are going to be (labor, materials, rental fees, fuel, etc.), and then mark it up based on how much profit you're looking for.
As far as renting a machine, I always use the most economical rental period that comfortably allows me to complete the job. Don't forget to factor in days for weather, especially this time of year. I always try to give myself a little slack. No need to be all stressed out, scrambling to finish a job before they come to pick up the machine.
Rental houses usually quote a daily, weekly, and monthly rate. For my area, they all pretty much use the same formula where:
3 x daily rate = weekly rate
3 x weekly rate = monthly rate
Any time I think I'm going to need the machine for a few days, I try to rent it for a week. I figure the entire rental fee (including delivery charges, damage waivers, etc.) into my costs, and then bill myself out at an operator's wage, based on how long I think I'm going to be on the job running the machine. For example, if I thought I had two days of digging, I'd figure my costs to be a 1-week rental plus 16 hrs for an operator.
Now, if I thought my bid was too high, I'd have to go back and either rent the machine for less time (and be stressed out he entire time about finishing on time), or take a little less of an operator's wage.
This seems to work for me, but I'll be interested to hear what some of the other guys have to say...