To my knowledge, and what I have used in practice- The percentage basis was primarily a factor of retail style selling where a customer planned to buy x TV for 3000, x speakers for 1500 and x amp for 1000, and only planned to spend 5000 (yes I know the math doesnt work, but thats the normal retail customers planning).

So to counter this I would normally ask/approximate/or figure out the customers planned budget and then explain that you will also probably need to factor in about 20-30% for cabling/power/remote/other accessories/etc (usually aiming higher then neccessary to not have to fight at the end), plus tax, plus the highly recommended (but annoyingly dreadful to present) "Extended Warranty", and whatever else the boss says to push today.

From the CI perspective cabling is part of the process, and is part of the designed package. Now my assumption is most of us have/offer 2 or 3 'levels' of cabling, the cheap stuff, the good grade which we collectively or individually feel is a great value and performs well, and then a higher end offering that we occaisionally present when we feel the designed package could definitely benefit from its presumed increase in quality.

So, I would not say the Percentage Basis of estimation is Hog Wash, but rather a tool to be used while planning or budgeting.

As far as the level of diminishing levels of marginal returns are concerned with upper echelon grades of cables, Buy what you feel offers what you want, and are comfortable with. And don't feel bad if one of those factors is looks, because it is fun to show off your stuff and say look how cool this cable is...Or maybe thats just me!