Encouraging them is one thing, but I draw the line way before making a fool of themselves on national television.
LOL, I was looking through some X-Factor auditions on youtube the other night and thinking "reeeeaaaaly??" They all told you you've got a great voice???
They may be tone-deaf themselves.
I went to college for art, and one of the things I do is oil painting. I'm just average, but I like it. My dad tells me I am a fabulous painter, and I like that he is proud of me -BUT- he is still wrong.
Maybe those people don't have anyone IRL to compare themselves to, or to properly critique them. Maybe they just sing along to the radio and a family member or a friend keeps telling them they sound awesome. So they give it a shot and they get horribly embarrassed.
It is good that your DH has someone like you in his life - to listen to him practice, and to give him an honest opinion. He's a pretty lucky guy.