1. Definition: crackhead - n. - A person who's actually very nice and supportive, but ends up treating you terribly anyway. E.g. terrible organization, constantly panicking over nothing, etc.
Avoid crackheads. Just leave them be.
2. I believe Competent Assholes can be dealt with if you've got a good contract
You know, eventually someone's going to make some DnD style cards for different kinds of bosses. Would be great if someone made these for VCs :-)
Reminds me of H-B situational leadership theory (with the client analogous to one's "followers", and "willingness to perform" analogous to assholery; see http://en.wikipedia.org/wiki/Hersey-Blanchard_situational_th...) You want a client in the R4 or R2 performance readiness level, are willing to put up with an R3, and don't want to deal with R1s (no one does; unlike R1 employees, R1 clients aren't worth the investment.)
Although this model can apply to anyone, I was originally referring to clients.
If you have a client who is Incompetent + Nice and never becomes Competent + Nice, then either you need to do a better job of hand holding, or you may just have to settle for steady revenue that you have to work for. Either way, you both win.
Competent + Asshole = I'll put up with them
Incompetent + Nice = I'll hold their hand
Incompetent + Asshole = You've got to be kidding