I think the definitions of "standard" and "cover" are a little bit fuzzy. The difference tends to be a word you use depending on the genre of music that you are playing, instead of what you are actually doing. For the most part, "standard" applies to jazz, blues etc. and "cover" applies to pop, rock, etc. but I think this is really misleading. I much prefer the suggested definitions of a "standard" being a song/tune/piece of music that you use as a jumping off point and interpret your own way, and a "cover" being one that you try to play very similarly to the original recording/interpretation.
Using those definitions a lot of "covers" are looked down upon because they aren't as good as the original. If you are trying to remain faithful to how the original band played the music and something is not exactly the same, maybe your drummer doesn't have the kick beat down perfectly, maybe your guitarist isn't using the random alternate tuning on the recording so the voicings don't sound right, whatever it is: your audience has usually heard the original plenty of times and is going to know if it's "wrong". If you play "Sweet Child O' Mine" and don't NAIL the bass part note for note, someone in your audience is going to notice, and the typical response is "I can totally nail this on Guitar Hero, so obviously that guy up on stage is a complete hack." If you are going to try to play faithful covers, they have to be executed exceptionally well to win over an audience. Especially an audience with internet guitar/bass forum guys in it.
Likewise you can "cover" a band's version of a "standard" with similar looking down on you happening. Play "what a wonderful world" at any background elevator music type gig, and no one is going to bat an eye. Have your singer try to do the Louis Armstrong growl on it, and EVERYONE is going to have an opinion on your performance.
Personally one of the big problems I see with turning a "cover" into a "standard" is that a lot of bands really don't make it seem deliberate enough. If you don't try to do something different with a pop song or even worse you play a bunch of covers all night and they all have an uninspired "we're playing the right chords at the right tempo and singing the right words, so that's close enough" it gets boring fast. If you do something really different with it and make it your own you're likely going to have a few people hate what you did, but you don't fall into the trap of it not being perfectly faithful to the recording or it being mediocre. As a readily available example, Aerosmith's cover of "Come Together" does nothing for me because it falls into that not deliberate enough "we played the right notes" box for me.
That's where I see the covers hate coming in. NAIL it, or really make it your own, and you definitely have my vote. Play it 85% as good as the original, or play a whole set of what should be contrasting covers in an uninspired monotone of "this is what our band sounds like" or "our drummer only knows one groove" or "I only play quarter note roots on the bass" regardless to what happens in the original song? You are going to have a tough time winning over me, and a lot of other people in the audience.
Are people who play in cover bands lesser musicians than people who play in original bands? It really comes down to the individual musician. I know some originals musicians that are horrible and some covers musicians that are fantastic. If someone told me I was a horrible bass player for playing "Roundabout" exactly the same as Chris Squire or thought I was a musical genius because I pounded out some roots in a three chord original turd of a song, that person's opinion isn't worth my time.
