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Having made an adjustment like this, which went well, I'm inclined to suggest you try to make this work for you. In all likelihood, the company is presenting the situation honestly. A known quantity is likely to be more attractive, so accepting the consulting contract is a good move, and it gives you an opportunity to interface with (and influence) them on a daily basis.

Pricing is normally higher per hour for consulting than salary. I see no reason to offer them a deep discount on the consulting rate, as it might make justifying the full-time position harder. If the full time position pays $100K + benefits, the consulting rate should never be lower than $50 an hour, and a number closer to $100 is probably about what they expect.

However, I'd look for a contract template (don't rely on them to produce it). And, I would try to include some language in the contract that smooths the transition into a full-time position. If nothing else, it will let you gauge how serious they are. If they are at all used to using contract consultants (and it appears they are), this should not be a problem for them.

Other things to consider:

As a FT employee, salary is not the only costs incurred by the company. There are the necessary taxes, benefits, etc.

Normally in a consulting relationship, these costs are born by the cosulting company, and not the company that is hiring the consultant. If they are hiring you directly as a consultant (in effect you are a 1 man consulting firm)), all these costs (in the US, these include federal and state income tax, social security tax, state unemployment insurance, health insurance, etc) will likely have to be born by you. Read the proposed contract and verify who will be responsible for all these additional costs before proposing a rate.

Added note: they've already sent me their template consultant contract, but, puzzlingly, it is 100% empty, except for their standard T's and C's.

That would be understandable for a "normal" engagement, perhaps, for which a consultant would fill out the proposed project gaols, parameters, etc. But in this case, shouldn't their job description be the basis? I'm pretty sure the problem is that they haven't defined it at all yet for the permanent position or this temporary one...

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