The hardest question which I battle with is knowing when is the right time to fold and start afresh. PG's 'Relentlessly Resourceful' post ties in very well this - http://paulgraham.com/relres.html
I agree. I remember reading Seth Godin's book "The Dip" and the same conundrum is presented: when do you push through the dip and when do you quit?
He says you should quit when you're in a cul-de-sac or heading towards a dead end, both ultimately ending unfavourably. A dip, on the other hand, has a low point that feels like a dead end but inevitably gets better the longer you persist.
A good, short read that gives some suggestions to deciphering which is which if you're interested.
Great story, very inspiring!