LTS: or fewer people put off by amateurish performances?

I don't recall any professional singer reading from notes, even for a brand-new song. It is a privilege to experience a new song for the first (or at least very early) time, and using notes might reasonably be forgiven, but I don't recall it happening in my experience.

This might well be the kind of thing that varies from club to club. My regular club is predominantly a "concert" club: even on singers nights people do sing and play without texts. (Generally, there are always exceptions.) If your club is only a bunch of friends that sit around and sing to each other, then all sorts of allowances can be made. The same for a gathering in a pub at a festival. But if you have paying customers, then it is rude not to have learnt the words. Forgetting the words in mid-song is a much less heinous offence: that can and does happen to the best.

Folk etiquette, either you get it or you don't. A bit like people who get up for a beer, or wander in with a new one, in the middle of a song. You just don't do that! But people do.