When it comes to tributes, I reckon that audience seem to look for the following when watching -
- does the singer look like the original?
- does the singer/band sound like the original?
- is it a good show?
As the gig goes on, each one is superseded by the next.
I used to play in a Bowie tribute. Did the singer look like Bowie? Not exactly. He's quite a bit more heavily built than David Bowie, but certainly does not shy away from the outrageous (and skimpy) outfits! This could be slightly cringeworthy at times.
Did he sound like Bowie? Not bad at all, a great singer overall, and he really put effort into copying the phrasing and singing style.
Was it a good show? Yes. Obviously I can't speak for the entire crowd, but my observations were that the initial bemusement/cynicism soon gave way to enjoyment. Where the singer lacks some of the aesthetic points, he more than makes up for in showmanship, charisma and singing.
My favourite comment was the man who had seen Bowie a few years previously, but said we were much better! I suppose that this another point to bear in mind; the great acts were at their best when full of youthful energy, and the shows can be a bit less exciting when they're 65 years old and rooted to the spot. A tribute offers some of that 'golden era' magic.
To answer the OP, is it degrading? Sure there can be some embarrassing bits on the aesthetic side of things, but if the band show that they respect the original greats, play well and the crowd have a good time, it's definitely not degrading.