I don't have a problem with people singing from songbooks or folders (many people here do) but I DO have a problem with people spending ten minutes flipping through a phonebook-sized folder when it's their turn, in search of something to sing. I have seen people spend the duration of an average ballad in searching for inspiration and then give up.

Keep it small (preferably stapled A5) and keep it indexed. Maybe catagorize it into light and funny, tragic, romantic, political, work songs, etc so that people can easily avoid getting stuck in one type of song.