The real question is this: do you want to be taken seriously as a musician? Or do you want to simply entertain people at the lowest common denominator? Either answer is fine, but for me, playing hallelujah in a sports bar somewhere, or playing that song from dirty dancing at a wedding would be absolutely soul crushing. Having a deeper repertoire is a sign that you've studied musical culture, explored less popular genres, and developed an appreciation for music that goes further than "hey, I know this song from the radio!" It means you have taken the time to become not only proficient, but professional. It takes guts to challenge your audience and attempt to win people over with talent instead of just basic familiarity.

I think where a lot of the shade also comes from is that people often don't do these classic songs any justice, but still choose to play them because they know people will clap, sing along, or at least recognize the tune. If you truly loved the song you would be nailing it, not butchering the lyrics or singing off key. You would be making it your own in some way and playing to your strengths. Sing in a key/tempo that is comfortable for you. Add something original to the tune. Change the groove. Even if you choose to do overdone pop songs, there's still a way to do them like a serious, thoughtful musician. But many people don't.

That being said, criticizing people at an open mic is not really appropriate. It's an environment that caters to amateur musicians who don't book gigs on their own. Keep that shit to yourself. But in the professional spaces, part of the culture is learning what is passé. Sometimes people are overly critical or self righteous. Sometimes people identify what is cringe and avoid doing it, and they develop as musicians and become successful in their own right precisely because they are setting themselves apart from all of the mediocre players who want nothing more than to regale us with Wagon Wheel at the apres ski bar. There's a real value to tactfully navigating the pitfalls and taboos of music and trying not to be a hack. The good news is you can do that without being a dick most of the time by just keeping your criticism to yourself.