A Dilemma

One of the first assignments I got was from Marina, who asked me to write a humorous short story using certain words and phrases. A scene immediately came to mind, and I began writing right away. Then I remembered why I haven't attempted to write fiction since high school: I have no idea what I'm doing. The story has a directionless plot, too many characters, an unclear concept, and a villain so mysterious that even I don't know what makes her evil, or if she's evil, or what horrible deeds she's done. So I ask you: When you're working on something and it's just not working out, how do you decide whether to start over, keep soldiering through, or give up altogether?