When I revived the local folk club 18 months ago several performers turned up with folders/books which they sang from. One person had a vast repertoire of excellent self penned songs that he needed the words for. I made the point ( in a light hearted way) that if a song's worth singing then it's worth learning.
There is now only the odd occasion when a crib sheet comes out, usually with an apology from the performer.
If the words are forgotten (and it happens to us all) we are very forgiving and make a joke of it without any disrespect to the song or the singer.
Last week I sang a song for the first time in public that I liked and had wanted to sing for many years but had trouble remembering. I spent a few days determined to learn by constant repetition around the house and at the club had the words printed on a piece of paper folded in the palm of my hand which I did not need - SUCCESS!!
I have about 60 songs committed to memory but will always run through the ones I intend to perform before leaving home.
I agree that to sing a song with feeling putting your own stamp on it will vastly improve your performance and only comes once you know it by heart.