Obviously there are strong opinions here but it's a question that each person needs to decide for themself.
I agree with what Bill D said (16 Nov 07 - 05:26 PM). [Well I ought to, we have discussed it often enough.]
If it helps to have a crib sheet there as a backup when performing; if you are singing in a song circle and really want to do a particular song; if you need it for some other reason; and if you can sing the song and make it sound as if you were singing from memory -- I think there are plenty of times when a crib sheet is OK. Obviously no one here is advocating singing every song from a crib sheet, or reading the words during a performance.
But, you know, I believe Big Mick did that just once, in the Getaway evening concert. He was reading a song he had just learned from El Greko; there hadn't been time to memorize it but Mick wanted to share the song. The song, and Mick's singing, were wonderful and memorable. Absolutely appropriate.
We have a friend who physically cannot remember complicated words without a tremendous amount of effort put into learning them. But she is a good singer. I am happy to hear her sing a song with words in front of her. I wish she would bring her song sheets and sing more often.
I have a good memory for lyrics and know hundreds of songs (not necessarily folk songs) and can dredge up many of them with a quick mental run-through. All the same I take a cheat sheet to our local Open Sings if I want to sing something I'm not 100% sure of. Most of the time I just use it to clue me into the next line or verse if needed.
BTW -- Knowing a song really well doesn't keep you from forgetting the words! I sang "Dumbarton's Drums" in front of quite a large audience a couple of years ago. I sing it frequently, have sung it for years, and never dreamed I might need to mentally "run through the words" first. I got to the first chorus, sang "What fond delight, doth ... ... ... ..." Luckily someone called out, "steal." I waved a thank-you, sang "steal upon me," and went on from there.
The rest of the song went beautifully, and the singing on the choruses was all one could ask for.