"So is what happens at in folk clubs & singarounds - often cheesier, and invariably more formulaic."

Yes, and I've seen that too, tho' I didn't want to be the first to say it considering the monstrous battles such statements appear to provoke here! ;-)

However, having also been to a few of the sessions that Melodeonboy attends, I've also been spoiled by quite the opposite of such a scenario. Just as he describes it: lively, musicians joining in together, spontaneous harmonising, original material, daft parodies on keyboards, group a'capella trad. songs, solo unacompannied trad., blues, spirituals etc.
So I think he's quite right, in as much as there's an extremely restricted scope for either individual or group musical creativity involved. However much fun it might be, Karaoke is still to music making, what Ladybird books are to reading. And entertaining as it can be for a bit, it'd probably become frustrating after a while. Same as Mum shopping at Iceland, initially exciting goodies can start to make you feel a bit squiffy - especially after a few too many prawn puffs and Findus crispy pancakes..

That's not to knock it tho', as I think it's a great thing that people just want to get up and entertain each other - which is certainly in the perennial spirit of people and indeed of 'folk'. It's just got an inbuilt rigidly fixed ceiling of potential, which no real instrument or free voice has.