How should I handle over-demanding assignment providers?
We run projects with real-world clients from within our school building.
I would add to Buffy's beautiful answer one idea that we've communicated to the clients that our students will be working with:

As gifted and wonderful as our students are, recognize that they are still students, and the primary purpose here is educational.  The work that your group does should not be mission-critical.  An ideal project is in the nice-to-have category.
If you have discussed doing something more significant with your group, and they understand the challenges and are willing to undertake the project, then we will not stand in the way.  Such projects can be valuable learning experiences!  While we do provide support and oversight to the project groups, our ultimate target is learning.  Please be prepared to provide extra support as needed if you are relying on the outcome.

I think this nicely captures an important aspect of internship projects.  They can be useful.  Heck, ideally, they should be useful.  That's part of what makes a good internship so motivating!  But students are still developing their skills, and the results can be uneven.  I wouldn't rely on it for mission-critical pieces of my work.