We our starting in our Local SEO Service soon, and i am pretty interested in this also.
My thought on Seo proposal`s were to include :
What we offer : SEO analysis , Competitors tracking, On site/Off site SEO ( backlinking ) , traffic improvement, 24/7 support etc..
What originalposter said, all that customers care about is ranking high ( if they know what seo is ) or improve their business and sales ( ones that dont know what seo is ) .. So i think its important to include both categories of people in the proposal and make it as noob friendly and professional as you can.
And also make all proposals personal. Analyse the company you are going to propose, include a couple of free on site seo tips or marketing tips in there and make a reasonable price for starters. You want to show them results first before you turn them into your longterm customers.