Most clubs have a wide spectrum of ability/talent and personally I would rather see someone up there with a sheet, than not being up there at all for fear of running the gauntlet of scornful stares from those who disapprove.
The other side of the coin for me is this. At one of the clubs I go to there is a singer/guitarist (who draws from a core of about 30 songs)and is very averse to using "crib" sheets as it is "not very folky" (his words). The issue is that every club night he bumbles lyrics, repeats lines and verses and puts in additional guitar breaks whilst he stands with a pained expression trying to summon up the lyric. It is even worse when he is singing without an instrument as it is then an even more painful silence, occasionally punctuated by a self deprecating joke.
The man is a decent enough singer and guitarist and plays stuff he is well practiced at and familiar with. But he just can't remember it fully. I would much rather see him "cheating" and delivering a complete song. Not everyone can do everything to a standard that others want to hold them accountable to. That shouldn't mean (IMO) that they should be confined to their living room and barred from public performance.
I have a friend who has absolutely no sense of direction. He can take a straightforward journey 10 times (with a navigator) and get lost on the 11th going solo. If he wasn't allowed a crib sheet in the form of a map, or sat nav we might never see him again! He should still be allowed to drive in public though.