All the above advice is great. My own personal prejudice is sea shanties, since I love them so much, but you'll get a greater familiarity quotient if you stick to the more well-known stuff. Again, Pete Seeger / Weavers albums are a sure-fire index for songs that can't fail.

The best songs for eliciting participation are the ones with easy, beautiful, well-known (or easy to learn) refrains, such as Goodnight Irene and Kisses Sweeter than Wine. Just ask yourself which refrains will be the most fun for them to sing.