1. Have a purpose - a prism through which song-picking decisions pass: What are you trying to do? Who are you trying to be? What kind of places are you generally going to play?
2. What does the band sound credible doing? If you don't have the talent, the feel or the instrumentation for a song, don't bother.
3. It's not a democracy. Everyone should have their input, but if you do the old "everyone gets 8 choices" or something, you'll end up with a mish-mash of junk that won't fit together. Or worse, there is ALWAYS someone who wants to play less well-known tracks because he or she likes them. As if that's the point.
4. Unless you want to play in front of empty rooms, think not of your personal taste, but WHAT WILL WORK WHERE WE ARE PLAYING.
You might not like doing Mustang Sally (God knows I've come to loathe it), but it always works. If you want to be a success, you're going to have to get your satisfaction not from playing songs you like but from the FEEDBACK you get from an audience.
That being said, bands I've been in were usually willing to try songs but if we played them out 2-3 times and got no real reaction (or worse, negative feedback), out they went.