I am in the thought group that one should dress for Formal night. I was raised to always dress in accordance with what is requested of you by your host or you are being rude. Sorry just the way I was raised and I won't change my opinion. "I" think that one should either dress as requested or skip the MDR and eat in Cabanas (you will get table service and some of the same menu items as the MDR's). With that said, Tux's aren't required for formal night but formal does require men in jacket of some type and ladies in a dress, skirt or suite.
Palo is also very strict on their dress code and will make you change if you are not dressed accordingly.