Well that's disappointing! Sorry to hear that's what happened. It seems strange that they would have a "real band" open because no kidding it would intimidate those that have less experience. I don't blame you for feeling nervous.
Especially if people are encouraging you, definitely get up there. At those types of things, people are very understanding and supportive. Just having the experience of getting up in front of a crowd of strangers is amazing...no matter how well you play.
For us, we are paying $50(US) for 3 hours. So we are spending $200 per month for rehearsal space. Spread over 4 of us though, this is peanuts, especially when you consider that they have a nice Tama drum kit, 2 (yes 2!!) Marshall Tube half stacks (JCM 600, 900?? don't remember), and a 500W Hartke bass amp. Wow!!