I'm sure that somewhere in all the recent stuff that's been quoted the DCMS has specifically said that the public entertaining themselves should be considered incidental music.

Sessions are usually not provided, even partly, for entertaining an audience, which is one of the requirements for "regulated entertainment". On the contrary, an audience is usually unwelcome since they take up space which would otherwise be occupied by musicians - that's the situation at my regular local session, anyway, although we're not rude enough to tell them that.