I personally don't think image is important. Of all the bands I'm a fan of, it was because I heard their music first, not because they wear cool clothes. When I go to see them live, I don't look at what they're wearing, I couldn't care less. Of course in certain situations, a common look (like the Madness suits) or something striking (like Marilyn Manson) works - but more often than not, amateur bands will look a bit stupid trying to pull it off. Of course don't wear your scruffiest curry stained t-shirt, make an effort, but not too much.
If you're in a wedding band, playing classical or jazz, etc, then a suit is usually part of the uniform.
On the other hand if you're trying to make commercial music and get written about by publications that favour style over substance (e.g. NME) then go and dress like a red indian, paint your face and wear a pink feather boa, whatever floats your boat!