This has been a discussion I'm familiar with, as to whether we want to play the smaller, more cramped venues that don't really benefit from putting on music. Some just aren't fun, so personnally I'd forfeit the gig, take the loss and not do it. My take is if it's not enjoyable, why play? Being fair though, it's not my livelihood.
Interesting topic though as I've seen a decline in live music in pubs, which is a shame. With that we're having to travel further to get good gigs. Still, less gigs is better than no gigs I suppose. :-)