What are the 3-5 biggest ethics problems in SEO?

1) Compromise between risk and reward with a focus on returns for SEO agency
2) Still selling the idea that you are going to be ranked on hundreds of search engines that no longer exist like MSN, AOL, ASK
3) Using clients pages as a source of links to support other clients (house of cards)
4) Ranking low competition, low volume keywords that will never benefit the business
5) Not measuring or tracking results
6) Guaranteed results for #1 position

The question of ethics for SEO is a tough one. As already stated anyone who promises any sort of position or rank on a term is flat out lying, at least for a ranking that will have sustainability over time.
There are folks who burn domains and IPs to build links and cloak content, but really the question of ethics for SEO is tough. The reason being the engines dictate what the ethics should be. There was a time when meta keywords were the way to go, then it was exploited. Now it's back links, and there is a market to exploit that. There is the issue of cloaking which I believe Google is trying to solve with instant preview.

The thing is at the root of it all, anyone who is looking to improve SEO rankings is looking for ways to game the system. There is a reason Google's mantra is "optimize for your customer and not the engine". There is also a reason they keep the algorithm a closely guarded secret. At the core of it white hat or black hat anyone who is in SEO is at heart a hacker of a sort. They are trying to reverse engineer the algorithm and figure out what makes it tick with out going so far as to be banned by the engine.

So today things that will get you banned or impact your rankings negatively:
1) Cloaking content
2) Get caught buying Links
3) Keyword Stuffing
4) domain and IP abuse
5) Lots of links from bad neighborhoods

Ethically are any of these "bad"? I would say they are no worse than someone who realizes that keywords in URLs helps and modifies all their URLs to be keyword rich. It only becomes unethical when Google or the other search engines say it is, and send it to the spam team to deal with. Today the five I listed I think are the big ones they deal with.

Well there are a couple that come to mind. Backlinking for one. This is more of a google problem than it is an SEO issue, but generally speaking thee with the most backlinks wins. That doesn't necessarily mean they have the best content or they are the "best" authority. It puts small business at a disadvantage and the backlinks are generally not authentic. They are purchased from backlink companies - not earned. Since google has continually given at least 50% of the overall SEO pie to backlinks this in general has a lot to do with why we see sites ranking high that really shouldn't be.
On the other hand I notice a lot of SEO companies on the web claiming they will rank your site in the top 5 for X amount of keywords. First of all you can't ever guarantee any ranking. We don't control google, google controls us. But even more concerning is what keywords are they speaking of. Sites will rank naturally for keywords with very little searches. Those keywords are useless. Very important to ask any seo company claiming they can rank your site for keywords what those keywords are. Then do a little homework of your own and find out the value of those keywords. Are they getting any searches? Are they worth anything at all? My guess is no otherwise they wouldn't be promising anything at all because it's impossible.