I can only speak of performing mentalism for an inebriated audience, not magic, though I did close-up in bars a lot in my youth. I haven't performed in or hung out in bars for decades now (old fuddy duddy) so don't know what it's like any more. But I regularly perform mentalism and hyp for audiences ranging from cold sober to so drunk you could perform surgery.
I recall a breakfast show I did for a mining company in West Virginia about 20 years ago. They decided to hold a breakfast instead of a dinner because in previous years the miners left the function so impaired several parties drove off the mountain after the banquet. The plan didn't work, the miners brought their own liquor and there were several after-breakfast incidents, including a five man fist-fight in the hotel lobby. I work for classier audiences these days, at least they dress a little better.
I don't think you should change your regular material because your audience is in its cups. Just do your regular act with dignity and confidence. If you try to improvise on the spot there's a good chance you'll lose control of the situation, your temper or your audience members. You're hired to do the act you do. If you step out of character to engage in verbal combat with a drunk it can drag down the momentum of your show. Wrestling with drunks is like wrestling with pigs: it only gets you muddy and the pig enjoys it. I learned that in West Virginia.
Witty rejoinders to the audience are part of any performer's toolkit, and like all other aspects of the act must be rehearsed, and must be consistent with your premise, your character and the effect you wish to achieve with your audience. But it's also easy to get so carried away with witty repartee with the audience that you drift away from your script, and this is bad -- also easy to do with an unfocused audience. Again, there goes your momentum.
Some audiences are faster than others, especially when you do mentalism, and a performer learns to adjust his or her speed to accommodate the "data rate" of the audience. When alcohol is a factor, I would take care to go slowly, explain instructions clearly, and double check to make sure they follow instructions. And when they don't, which is inevitable, don't lose your cool, just plug on. Mentalism effects shouldn't be complicated anyway, a drunk should be able to follow the simple instructions as easily as a cold sober person. "Think of a word." Draw a picture." Not exactly differential calculus.
In the matter of working for drunks, I would rather work for a working class drinking audience than an upper class drinking audience. The working class folks handle alcohol better in my experience, just because they drink a lot. When I do an awards banquet at a country club, for example, it's one of the few times a year the stiffs let their hair down and they don't handle it well.
The usual situation is this: A cocktail hour, with people putting it away as fast as they can, followed by too much dinner, desert, more drinks, a mind-numbing speech & awards ceremony, more drinks, and then the poor entertainer turned loose on the alcohol-and-food besotted crowd. You have your work cut out for you to cut through that haze. It ain't what we dreamed of as kids watching the Magical Land of Alakazam. :D