We (wife and I, acoustic duo) fall somewhere between Faithful reproduction changing key for vocals and Simplified version I can play. So I selected both of those. I don't/can't solo so any sort of complicated single line type intro and or outro usually gets dummied down to something that is at least a headfake towards a recognizable facsimile of the original. Lead breaks mid song are usually scatted by the lead vocalist.
The process for us is to identify songs we want to play, go on the Ultimate Guitar app and check for difficulty level which is usually how many and how complicated the chords are to play. If it's not too bad then we'll save a personal copy which I'll then transpose (via the slick auto transpose feature of the app) and capo to find a key and an arrangement that works for us. As long as it's 'close enough' so as to be enjoyed by the target audience then we'll add it to the setlists.
While I appreciate those that have the skills and demand of themselves to only play/perform perfect renditions of songs, I just don't have that ability and likely never will. But as long as people enjoy what we do, we'll continue to do it for them.
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