The main thrust of the discussion seems to have veered towards the rights & wrongs of sound limiters and playing at low (sensible) volumes, but that would not be my concern in this situation.
I have no problem working with sound limits and I personally hate overly loud bands anyway, but that doesn't mean that I'd be prepared to insist that my band gives up an afternoon's work/pay in order to - effectively - audition for the venue, still less take full responsibility for anything going wrong.
The venue will be earning serious money from this event. They want my band to play for them (i.e. audition for their sound limited to get onto their approved list)? Fine, they can pay for that. They don't want to pay? Fine, sex & travel.