Specifically denied is "paid performances, or any professional performance before a paying audience". If there was a cover charge to get in, it counts as work.
I think they vagueness of this points to part of the problem. There is no real specification of what makes an amateur performer in a musical event. I would assume since he was not contracted to receive a payment for his performance, it would be acceptable.
And just because there is a cover charge does not count as work. The cover charge is collected by the venue and does not mean he will get paid, which was specifically the case here.
http://travel.state.gov/visa/temp/types/types_1262.html