I really enjoy a discussion that, by virtue of its nature, can have no resolution. Each of us has his/her own definition of what we would call "folk" or "traditional."
Whenever we attempt to apply hard and fast rules, we will undoubtably exclude a whole bank of tunes that someone else may consider to be their favorite "folk songs."
For instance, can we really say that the folk revival of the sixties *killed* folk music? Does that mean that future generations have nothing to look forward to and sing about? I certainly hope not.
I could go on (and on and on...), but I can't even see why we should exclude songs sung by horses. After all, I think Mr Ed once did a rendition of "Camptown Ladies." ;)
Anyway, we probably agree on the meanings of the terms more than we disagree. The discussion does remind me of a line from Ken Kesey's "Electric Kool-Aid Acid Test" that I'd like to mis-quote here:
"We can't define that term, because if we say that it is one thing, then it can't be something else."
I guess the important thing is to keep a song in your heart, and teach it to a young'un somewhere along the line.