Yes. I’ve been playing pubs, clubrooms, parties etc for 35 years.
The problem is that when you do actually make eye contact with members of the audience, that’s someone’s girlfriend or wife, and the guy glaring at you whose eyes you keep meeting, is probably going to hassle you at the bar, or hit you in the toilets. One night, I had to hit a guy across the mouth with my microphone in between ‘Get your motor running’ and ‘head out on the highway’ because he was “chesting” me while I was singing! Too much eye contact!
If the woman is unattached, that causes problems too. I married early from the group of ‘groupies’ that came to all of our gigs, so I get in trouble if women think I’m coming on to them, keep making eye contact and smiling at them as you suggest, and next minute they’re flashing their panties and you’re in trouble!
Once I adopted the strategy of focusing on objects just above the audience’s heads, that all went away, and yet I got a lot more “I felt like you were singing just to me”, “I love the way you engage the audience” type comments after the show.
I don’t really know how it works, but it works very well! 
In a large venue, with backstage facilities, so that you’re not having to use the public toilets, and stand at the bar between sets, I’d definitely use both methods.
When I’m playing at the clubroom of the local chapter of a biker gang though, I’m not making eye contact with anyone! 
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Sounds like certain kinds of trouble, like getting flashed, might not be too bad. Getting a fist in the mouth in the bathroom though could be a high price to pay! 
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One thing I learned from public speaking - " get up there realizing that 99.9% of your audience can NOT play harp.*
Robert
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