I've done both sides of this argument (cover/function bands and originals), and only took the covers/function work because they were paid gigs - often very well. My original bands have never made anywhere near as much money, but I'd rather do that than Disco Inferno for the 600th time.
Ultimately it's a personal choice - if there's money to be had then yes, I'd quite like some, but I think it's unrealistic (at best) to expect a venue to fund my indulgence in quirky prog/hard rock.
I don't do covers for free because it's not something that I'd enjoy doing as a hobby - and that makes it work.