I don’t use the term to refer to improv threatre. Improv theatre techniques are a useful part of the larp arsenal. Its not even about workshop techniques in general. I use it to refer to a specific design failure of hiding under-design by calling it a workshop.
Workshops can be a useful design technique. Effective workshops provide a strong framework for the game (Brick and Water), or flesh out a genre (Will That Be All, Arsenic and Lies), or are used to supplement other information or rehearse and cement relationships. The key point here is that the designer has put some thought into it, into how the larp works and what information the players need to provide to make it work, and the workshop is focused on getting that information.
But there’s a lot of larps around where the word “workshop” is used to hide the fact that the designer has nothing more than a vague idea and isn’t bringing much to the party, where they basicly give the players a blank page and say “here you go, design a game to fit my brilliant idea”. And that is half-arsed, poor design, not doing the job properly. I chiefly see these games online, though - not in the local community (largely due to the historical difference in design tradition).
For fans of the workshop tradition, I’d encourage them to design well. There’s a couple of articles in this book which are relevant: Lizzie Stark’s “How to design a workshop” has a useful section on co-creation, and the need for focus. And there’s a later article by Mo Holkar on “Co-creative design with players” which I haven’t got to yet.