I have heard this debate for many years and many times. And whilst people think that these are two very different ways of doing things, really, if done properly, they are very similar. I am very happy to discuss them, because I use them both.
The DJ with the pre-prepared set comes to the milonga with an idea. They want to shape the milonga with their music, entice the dancers with a script that they devised. More energy here, a bit more relaxed there… Nothing wrong with that! The problem comes when the dancers want something else. Whether there is too much energy or there aren’t enough people to build a quorum to dance certain music… It needs a change. It is only with this pre-requisite that this DJ can exist. Building your playlist before the set is perfectly acceptable but having the mastery to change it there and then is a must. When I DJ with pre-prepared sets (not very often lately), rarely my end product looks anything like the list I had originally planned (in fact, it has happened only once in over 150 sets).
The pre-prepared set is also not an excuse to leave the computer alone and go dance the whole event, coming to the laptop only to skip the cortina (or even worse having pre faded cortinas, which take no account of what the crowd is doing).
The DJ who comes with no music in his playlist before he starts has an advantage. His playlist will be modelled to the dancers because it will be built as the milonga is developing. This method requires perfect knowledge of your library. There is no time to be looking for a track to fit this tanda, let alone build a tanda from scratch. Obviously, you ask me to make up a D’Arienzo tanda in a minute and I may come up with five. But that is only because I know what D’Arienzo I have and I know what goes with with. Pre-listening is a very nice tool to confirm that the music you were thinking for that tanda is indeed the perfect music. Pre-listening is not good to look for a track for a tanda. Lots of pre listening will make the DJ centered in the computer screen, rather than on the ronda.
Whichever method you use, the playlist should be tailored to the dancers in front of you. And for that you have to do two crucial things… Know your music inside out, and pay attention to the milonga. You won’t go wrong!