I always prefer a draw to a cancel, as, again, if THEY didn't show up, I see no reason why they should get their points back and why those who participated shouldn't be rewarded a bit.
As for when to cancel and draw...if it's one power going out, and it seems like it'll be balanced anyway (this happens the most, in my experience, when Austria/Italy doesn't show, as then the one not can then sort of fill in as the third in the East and keep the balance 3 West/3 East) and it looks like things won't be badly slanted, unless EVERYONE asks me to, I won't draw or cancel, but jsut paly it out, leaving and no-shows are part of the live game deal.
Two powers, it depends; if they offset (ie, corners gone with England and Turkey, or the middle with Italy/Germany gone) and I MIGHT play it out and see how it goes, depends on what everyone else says.
If it's two powers in the same region (ie, Germany AND France) or three powers: no discussion, DRAW/CANCEL.