Funny how threads come back to the surface.
In addition to Frugalnacho's question about exchanging coins for bills, my gripe about "change being rude" is that it forces you to round up or down to the nearest dollar. If I get a $4 domestic beer I "have" to tip $1 (25%) or not at all, when all the server did was pop the top.
And thus the bit about change being rude. If you're concerned about the fact that $1 on a $4 beer is 25%, and you'd prefer to tip 20% ($.80), drink at home. Two dimes aren't going to impact you, and if they are, you can't afford that beer anyways.
The rule I've always heard is not that change is rude, it's change that "touched your hand" is rude. In other words, digging out $.80 to tip exactly 20%, instead of just giving a dollar. OTOH, it's customary if you're sitting in a bar to let a small pile of change (bills and coins) accumulate in front of you as the bartender charges for your drinks, and perfectly fine to leave it (the coins) when you go as part of the tip (usually on top of the tip, not figured in as part of it.)
So you have a $2.50 beer, you give the bartender a $20 bill. You get $17.50 back. Then you have 2-3 more. Now you've got a pile of bills and coins in front of you, leave the coins and tip your $1 a beer, and walk away. Everyone is happy.
My personal rule of thumb is $1/beer, $2/simple mixed drink (rum and coke, etc) and maybe $3 if I order something high end (a glass of nice bourbon, a $12-15 drink). If I'm drinking a long time, that will morph to 20-25% of the overall bill instead of paying per drink. Really though, no matter where I go to eat or drink, unless I literally only order 1-2 bottles of beer, I figure my minimum tip should be $5, whether that's 20% or 80% of my overall bill. It may be a very generous tip on a percentage basis, but on a pure dollar basis, it seems kinda rude to me to occupy someone's service for much less than that.