I've encountered this quite a bit lately and even wrestled with the question myself. I recently read on a writer's bulletin board a post that basically asked when one should finish a work and move on to the next WIP (work-in-progress for those that don't already know). A literary agent even addressed this question as well, so I decided to further the topic. As I've said, I wrestled with this conundrum myself, but luckily, I've managed to see past it. While I still haven't actually released my novel into the wild yet, I have gotten the inspiration to get it finished much quicker.
Here's my account: I began writing The Shadow People in 2005, before my horrible divorce. It took me 3 months to write the first draft. I set it aside while my life was turned upside down. I tried editing the hard copy in 2006, but felt it was too monumental of a task along with the ongoing divorce, so I quit after 80 pages. In 2007, after remarrying, I pulled out the manuscript and began thinking of how to edit the monstrous thing. I had a ream of pages before me and the mere sight of it took the wind out of my sails. Finally, I sat down with a legal pad and pen and read the whole thing through, creating an outline of revision notes on the pad. I thought it was horribly written and decided it needed a rewrite. I eventually rewrote it, although I don't remember how long it took to do so, but I think it was relatively quick. I put it aside again, to let it mellow. While it was tucked away, I began other novels, leaving them in various stages to work on other projects that felt more interesting. Finally, I stood back and looked at the mess of WIPs I had accumulated, realizing that if I kept on like this I would always have plenty of unfinished projects out there and nothing to show for it. Meanwhile, I kept reading agent blogs and news of debut authors selling their books to publishers. If I wanted to join these new authors' ranks, then I knew I had to get off my ass and quit procrastinating with my work. Like writing a first draft, I vowed to set some limits to accomplish the goal. I committed to editing a minimum of 10 pages each day. With 380 pages, it would take me just over a month. I made it through and it felt great! Now, I've decided to make one more pass, a 4th revision, but this one will be a lighter version since I've already completed the line-edit. I'll look at pacing, dialog that doesn't progress the story, etc. and clean all this up. When finished, I plan to distribute it to my first readers who've expressed an intrest in reading it to provide me with feedback.
The moral of my experience is this: writers are great at procrastinating! Whether they think of it that way or not, it's true. Maybe it's the trepidation we feel toward rejection. I could've continued telling myself that my work just wasn't good enough with each revision. Reading it over and over, feeling that I can do better than this. Of course, as writers, we should constantly be growing in our craft and this means that we will always look back at our older writing and see where we could improve it or express something better than we did. Even the famous authors have published books they can look back on, thinking, Wow, I could've done better than that! At least they're published! This is what finally lit the fire under my ass. I want to join the ranks of published novelists, so I decided to get the story written to the best of my current ability. If you sit on the manuscript, thinking you can always do it better, then you'll probably find yourself in the same detrimental cycle I was in. Eventually, you have to see if it has wings and can fly from the nest.