I do that too but these 2 guys were playing a major chord on one side of the stage and a minor chord on the other at the same time. My ears folded in on themselves. 
When I was hosting we did basically the same as you. We played about 20 minutes to warm up the crowd and get things going and then the official Jam started. I got to know who were the less experienced players and the more experienced. I tried as much as was possible to mix one less experienced player with more experienced players. That gave the noob a chance to play with more solid players who were able to carry the noob through. It also gave the noob player a good feeling in that they got a chance to play with more seasoned players. It also sounded better to the audience out front rather than 4 or 5 noobs crashing through the audio equivalent of a dark room of cans and bottles. 
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