It's good to play with others who do not have their heads down all the time. You can communicate with them, have a laugh, guess what they're thinking.And there's often lots of interesting things going on on the dance floor that you'd otherwise miss.
Apart - yes, it's a good idea. Maybe not the blindfold or paper bag, but certainly looking away for periods of time.Most pieces will not have great leaps of hand position , so there's no real need to look. My piano teacher would hold a book above my hands, so I couldn't see the keys. On guitar, muscle memory will aid finding the right fret - try it - a barre A on 5th fret, take hand away, try again. 8/10 is pretty good! Once in the box, most of what you need will be underneath your fingers. There's also the danger, if you're reading, that you'll lose your place. My students have the dots/charts just where the guitar head is pointing - eyes up and down a little, rather than watching a tennis match. Who came up with putting the music in front of a guitarist. (Yes, I know, it usually makes them play very quietly...)
And if you do hit a wrong note, pno or gtr, try to hit the correct one WITHOUT LOOKING.
Addendum - with the guitar neck, on the opposite edge to where little dots are sometimes seen, thus on the blind side, little blobs could be put, which would be felt by the inside of fingers. Maybe not on all marked frets, but, say, 5,7 and 12.