Coyote, I think that Beginners' Night is a great idea. One problem with the usual "audition" is that it's done under conditions that don't simulate the conditions of the performance itself. Many good entertainers -- maybe all good entertainers (as opposed to just good technicians)--play off the audience, and it's hard to show your stuff if you're trying to impress a lone judge (especially if s/he's sitting there with a sour or poker face). If you're doing comedy or singing funny songs it's even harder.
Then there's the flip side -- some performers freak out when they actually do have to perform in front of an audience--especially a big or rude one.
Also, the Broadway clichŽ of the audition is some director yelling "Thank you," after the poor singer has sung only a couple of bars of the song.
"Auditioning" via a Beginners' Night where you have a real audience and get to do 2 or 3 songs seems ideal.
~SWO~