well, to answer your question directly, yes, some people use MC for live performances playing it for backing tracks like karaoke. but that's not the strength of its design.
its strength is to record instruments (all instruments including or not vocals, guitars, bass, MIDI, etc) and to mix those into a stereo output for burning onto a CD or for streaming mp3's on the internet or iPods.
you CAN create backing tracks and play them in MC live and some people do this, but personally I don't trust using a computer as a live instrument for backing unless I had a killer rig and probably a backup rig as well. I'd rather put them on an iPod or burn them to a CD and plug THAT into the board for backing tracks. but that's just me. others can and DO use MC for live performance (personally I think there are other applications available which are better suited for that purpose).
now, to back up and address your concerns about the sounds - which is a completely different issue from your question....
Soundcenter is a decent softsynth and has some decent sounds, but face it, it's not a Yamaha Digital Piano. Look at the cost difference between the Soundcenter and the Yamaha. do you honestly think you'll be getting the same quality sounds out of it? you shouldn't. basically you get what you pay for.
there are better softsynths available such as Kontakt, Komplete, East-West, Ivory, Sampletank, MOTU softsynths/samplers, etc. the samplers are going to be more realistic sounding and much more expensive than what you have. some samplers cost thousands of $. some are hundreds.
I personally use Kontakt 4. Kontakt 5 is now out and I have not upgraded, but K4 was not cheap even tho I got it at a student discount for $300, IIRC. regular price is like $500? East-West Platinum is $1000. GPO Orchestra is $150.
Kontakt is the most versatile and has the most widely available 3rd party samples to purchase, IMO.
but bottom line - the sounds are decent in Soundcenter, but there are better sounds available if you don't like them, but you have to pay for them.