I am sure that most of us have witnessed the scenario that Ed describes, of someone with their nose stuck in the RB and responding to nothing going on around them, often enough to know that it happens pretty regularly and is a real downside to reading RB charts on gigs. It tends to happen with younger less experienced players. Learning to get off of the chart as soon as possible, recognizing the significant points and being open to and aware of options in the harmony takes experience and listening to what is going on. Yes, knowing standards is important and makes most gigs much easier. And although you should be able to get through a gig of standards with out the RB, I just have not had the experience that just because someone has a book on the stand the playing will necessarily be bad (side note here just to be clear, I have not carried a RB with me to gigs for at least 20 years). It just means that they don't know a lot of standards. The quality of the playing depends on who you're playing with more than the tunes you are playing IME.
On the other hand as an example of the bad things that can happen without a chart.... There is a bass player that occasionally comes into a jam session here and sits in. He never uses a book, he never asks questions about a tune or seems to even admit he doesn't know something. He plays by ear, responds to what he hears going on around him and is not stuck pounding away on an arbitrary set of changes. He also quite often sounds terrible. I have heard him struggle through at least 15 choruses of a tune and never once figure out the first four bars of the bridge. You could argue that he will get better at it, but he has been sounding like this for years. I would much rather hear him play tunes he knows, or read what he doesn't know from the RB. At least he would be in the ballpark.
Recently I played a singer showcase (you don't want to know how many of those I do.... let's say it's lots) with one of the most respected piano players around here. I love playing with him and he sounds incredible. Knows a lot of tunes and transposes them easily. I learn new things from him and his way around harmony every time we play together. At the gig one of the singers came up with a chart for something neither of us knew. The chart was in C, she wanted us in Eb, but it was a pretty simple chart and I figured we were good to go. The pianist however, who is an absolutely wonderful player refused on the spot because he didn't know the tune. Talking with him later he admitted that he really can't transpose on sight well at all and only reads marginally well to begin with and he was afraid of sounding bad. It hardly seemed fair, I spent the whole night feeling bad about my playing because his harmonic sense is so much more advanced than mine, and he wouldn't go ahead and sound bad when he had the chance.
I think the point for me is that we all have strengths and weaknesses. I know that no matter how much time I spend learning tunes, I will still play with players who know more of them. No matter how good my reading, there will be others who read better, others with better ears, more facility, etc. And others who don't do some of those things as well as I do. I also know that we all learn differently, some are more visual, some more intuitive, some very aural, but we are all a mix of those things. The idea of internalizing things (as opposed to memorizing them) is a good one, and people doing it in whichever way works best for them makes sense to me, even if it means they use the RB sometimes.
BTW, I really liked the links that Ed posted and John's blog posts. Thanks for those.
