Here's an interesting article from editor/writer Karen Cole about her freelance career. She gives some tips on upgrading your freelance income by taking on ghost-writing projects. [Edit: This link has been removed.]
She raises the interesting point that often editors are called upon to step outside their narrow roles and do other things to make a manuscript right. Sometimes as a freelancer you get paid more to do that, and sometimes you don't. I think it's a matter of making the employer aware, before you do the work, that it needs more editing than they thought. Then you can negotiate for a higher rate to do that work (be it development, rewriting, or whatever). If they won't give you the increase, in my opinion you should just do what you're paid to do and make sure they are aware that you believe it still needs higher-level work.
I used to hear all the time from in-house copy and production editors that they were doing the work that development editors should have been doing. But still they did it. They cared too much about the books to just let it slide. Meanwhile they were working insane hours to get it all done.
And I also hear from freelance proofreaders who feel that the copy editor before them didn't do their job. So they're having to fix a lot of things that should have been caught sooner. In those cases, I would suggest that yes, you fix the misspellings, typos, and inconsistencies. But you should restrain yourself from making it read like a masterpiece of editorial precision. You're making more work for yourself and for the layout person who has to make the corrections. Also, you're increasing the pre-press costs of the book and cutting into its profits. As an editor, it's hard to think this way. But most readers aren't going to know or care that the book uses "since" when it should be "because." A publisher will value you for your economy as well as your precision, so try to keep the big picture in mind. But by all means, feel free to tell your in-house contact (tactfully...) that you think the copy edit was lacking. It's something they need to know.