Hey all - thanks for the thoughtful replies! I figured this might be a topic that would generate a variety of insightful responses because, at one time or another we've all been there.
In this particular case, I think Joey nailed it when he wrote ...weaker players always seemed to want to rehearse a lot more: Confidence issues maybe, stage fright (which has never happened to me), who knows? because it was the two least experienced players that were driving the gotta be 100% perfect before we play out bus.
Also, Dave and Wolf made some good points about the expectations of the audience and the performer.
I agree, if someone is paying a $10 - $20 cover charge to see a specific performance in a club, their expectation would probably be higher than if they are just sitting around in a bar where there happened to be live entertainment.
I also aspire to the Harry James quote, but I temper that aspiration with a bit of reality similar to what Bill wrote: For every 100 times that I know I screwed up, my band-mates catch 10 and the audience catches 1.
To that end, I sometimes practice screwing up to see if I can successfully navigate out of it without derailing the song or anyone catching it. And, sometimes those mistakes can lead to something interesting.
And - everyone will know you've screwed up if you make it more obvious by your facial expression or body language...so I also practice going on as though nothing happened.
Bottom line - during a live performance, there will most likely be some mistakes. The mark of a true pro is expect them, prepare for them and for the band members to function as a team so the audience remains unaware that anything happened.
IMO, the only way to really become comfortable with doing that is to play live.