Exactly. When nobody I know is on, I just use Pandora - with a crowded room, I can't skip a song I hate. And with friends, you get exposed to new music from trusted sources, and everyone ends up trying to play something that's equally palatable.
(Unless your friends are jerks and decide to play Tool's LAMC.)
Sure. The problem is that we would most likely use the 'upload' feature to share songs and not their existing library. I imagine that feature is going to disappear really soon.