Peg - that's a really difficult one. It can be squirmingly aweful to listen to someone like that - but I don't think you can tell them they're really bad & shouldn't bother. Neither should you tell them they are good of course. The best you can do really is to try to find something good to focus on, even if its just the choice of song, or the lyrics.
I've only ever heard one person that fell into this catagory, and listening to her made my teeth sweat. But it was at an open-to-everyone singaround, so she was quite welcome to have a go.
Is it OK for people to join in quietly and try to guide her (tactfully)?

Kris