Note that this doesn't mean that Rackspace is shady because they promise 100% knowing they can't deliver it. After all, they put their money where their mouth is! They have an incentive to actually achieve 100% uptime. I'm sure there are other applications where the target is 100% (not 5 nines) availability, especially in finance, medicine, and militaries.
My recommendation would be to take your engineering hat off, replace it with a business hat, and provide them with a series of price quotes for various uptime SLAs. And then make sure you're pricing high enough that when something goes down for any period of time that you can make good on your obligations under the SLA without losing too much sleep. Then let the client choose the SLA that matches their business needs and budget.