People gig with cheap guitars all the time. A lot of folks don't understand that there is an upper tier of guitar buyers that think MIA Fenders are cheap guitars. I can't tell you how many people have come into my store, where we don't sell Gibsons, and complained about Fender's "crappy, bolted-together guitars." And I had a customer the other day who wouldn't even look at our Fenders, because we didn't have any CS guitars at the moment. "Don't want to waste my time with anything else."
The Squier/Fender thing is a marketing strategy. There is a type of customer to whom I can't even mention a CV Tele/Strat, because they want a "real Fender." That's fine; I love my Fender. But when I bought it, I was suffering from the same wrong-headed notion that getting the "real thing" would somehow make me a better player, or a successful musician.
...the cheap guitars do not stand up at gig volume...they just fold.
Out of the box, I'd tend to agree. If modding guitars was illegal, I would certainly never gig with anything less than an American Special. That's where the stock pickups and hardware meet my needs. My CV50's pickups are amazing, but the hardware is lacking. The MIM guitars have solid hardware, but I find the pickups lifeless.
Still, if I had a backup guitar, I'd take the CV to a gig.
Now, introduce the ability to mod guitars, and the CV becomes just as much guitar with an additional $25 of jacks and pots. The good thing for salesmen like me is that most people can't/won't use a soldering iron . . .