It's a thin line, with no perfect answer. I'm more in line with what DocZ does.
There are times when you have to let someone sing. I've made 100-dollar tips that way, and there are two reasons I'm in this business: I enjoy it and to make money!
I always carry a guest mic, one of the cheapo Samsons. The mic sounds good and if they drop it, oh well it's $19.95. I've never had one used as a weapon against me! That might change my whole attitude!
I like to be able to invite other pros to sing. However I don't always, and they generally understand when I decide it's not the right time or setting. A real pro NEVER asks to sit in. He waits to be asked.
Occasionally someone will stink it up. I usually say something like, "Let's give John a big hand for that effort. Tomorrow I'm going to get drunk and go help him on HIS job. (at the Bank or where-ever if I know what he does)."
You can always get by with letting someone do one song. You can never let them take over.
I always have control over the mic volume and occasionally the mic will unexplicably quit before a song is over.
I try to never let anyone use MY mic. I used to do this, but learned my lesson long ago. Using a mic after a drunk smoker makes me ILL. So does kissing one. And then there's the girl with an inch or so of lipstick to smear on your mic. Gag.
Just rambling. Good thread.

DonM