#2....you CAN have people pick songs that are straightforward that the band doesn't know. If you have a guy that is clear about what the tune does....it's a 1, 4, 5 and the chorus is 5, 4, 1. I've seen it work.
I've seen it work...sometimes. More often than not it's train wreck, even with very some simple songs.
It all depends on how well you know the skills of the players. If you have seasoned guys on stage that you know can handle something, go ahead. I've had guys show up at a blues jam and call Metallica tunes
So I stand by my #2...it's always the host's call whether or not to take chances on unknown tunes.