Hi jnyman,
You do make some very interesting points.  I think it depends on the venue.  My band was asked to play a company Holiday party and a company picnic and I turned both of them down and told them to hire a DJ.  They started telling me what songs they wanted my band to learn.  If you want The Freaks Come Out At Night and The Electric Slide then you need a DJ.  We have Clubs here that have 3 different bars with live music going in each room.  They have much Variety and play dance music between song sets.  I am playing a club that has us in the Blues Room but we play Classic Rock and Blues and Original music.  People come there to hear live music.  I am selective when I take a wedding reception or a dance. They are better off with a DJ.  If it is a biker type reception we will be Ok but we probably don't play enough country to give them everything they want. I do however, like playing parties and parties like live music.  There are really some bands out here that do play nothing but live dance music but you are right, it takes more players or they are runing tape with the band.  I play in a 3 man band.  You make more money when you don't have to split it between 6 people but it limits you as to what you can play. Maybe live music is dead in your town but it is kickin here.
                            Nutty

People don't dance in the bars in my neck of the woods. Maybe in a club, but not a bar. And, in places like Westwood, dancing is ILLEGAL. It's soooooooooo footloose.

The DJ is also cheaper and takes up less space. Also less likely to hit a bad note.

I've only seen one band out here get people dancing. Video Star plays Friday nights in Burbank in a restaurant/club. Hits of the 80s. Lots of 40 year old women. Great times.

The DJ may be replaced by an ipod of the future with software that automatically does a mix based on songs stored in a folder. Ah, the future.

So do you have to wait for a band to die to get a slot?

Limited venues would mean a more captive audience. Have the opposite problem here; WAY too many venues and entertainment options.

No problem at all here on Okinawa playing live, as my still ringing ears can attest (subject of a whole other thread). Tons of young people who are away from home for the first time with money to burn in their pockets. I could play every weekend if my real job wasn't constantly getting in the way!

Yes. to some extent.

Because with some bands, you can say you are a fan and don't ever have to go to a show to hear the band play live. They can record a show with 4 people in the room, put it on the web and people can stream without ever showing up.

Improvisational music still has its live fans. That I know for sure. You can't hear a good jam in its BEST form without being there and witnessing it unfold.