Howard,
I don't think you and I disagree that much.

Yes, the focus in folk music is the song, not the singer. To me that's why I'm not crazy about hearing the great singers & instrumentalists "fake it" or leave out key verses when they go blank (as anyone can do) on a well-written song.   And that's why it doesn't bother me if people have some sort of cue-sheet handy.

I like this: ".As for performance, all a folk singer has to do is stand there and sing. They're not expected to do a dance routine, or wave their arms around in a cloud of dry ice."
LOL
Of course, what I mean by "performance" is things like engaging the audience, putting feeling into the song, etc., not doing a tap dance while singing.

Much of the discussion here seems premised on the idea that our songs are short, simple, and/or repetitive.   And I do many songs of that sort, where I'd never feel the need to use song sheets.   But there are other types that are more challenging, especially if you want anyone to sing along.   E.g., one of my "special" songs is the US Civil War song "Lorena." Even if I leave out 2 verses, there are 4 more, and there's nary a repeat in the lyrics except for the name "Lorena."   Plus a few lines in the verses are sort of interchangeable (from one verse to another), which is a problem if you want others to sing with you, which I do.

As for the competence of those who may be playing and singing along, I jam with some folks who are superb instrumentalists and good singers too. They can usually play along without chord sheets if it's "folk" or "country" or "bluegrass" and they can be good at harmonizing too. But if I do a song they haven't practiced singing and it doesn't have a chorus, or I want them to join on the verses, they really need lyric sheets. These jammers usually don't use printed material -- though many fiddlers like to have "the dots" if it's not an old favorite -- but if they do use lyric sheets or music scores it generally makes for a better jam on the new song than would be without the sheets.   The other thing about jams like this is, the way the group often learns a new song is to use song sheets the first few times.   The jam session is, among other things, an opportunity to work up new material as a group.