they're accepted as part of the repertoire because they fit beautifully into the genre

The two phrases I've highlighted are precisely the difference between playing and singing. At most of the FCs I've been to there is no "repertoire" as far as songs are concerned; people don't sing together, the odd chorus apart, and people don't swap songs - in fact it's bad form to sing someone else's song. Everyone has their own repertoire - Bert plays Donovan, Simon specialises in Jacques Brel, Bob sings Hank Williams and everyone does some of their own songs.

And as for the genre - what genre? There was a genre of thoughtful acoustic balladry which flourished in the clubs for a while (Jez Lowe, Harvey Andrews, Tom Yates et al) but the relation between that style and traditional song was always a bit complicated: a few songs from that scene do sound like long-lost broadside ballads, but most of them just sound like contemporary songs. These days, in a lot of clubs, folk isn't a genre at all, but a way of making & listening to music - high on enthusiasm and variety, low on skill and consistency. I agree with Rob N and with Suibhne (departed), up to a point - an 'open mic'/'open stage' evening can be a great source of popular creativity, a real folk art form in the broad sense. BUT

(it's a big but)

it hasn't necessarily got anything to do with the old songs. Genre gone.

At the mostly-trad singaround I go to, on the other hand, people can and do sing a bit of MacColl or Lal Waterson or Peter Bellamy, and they do fit right in. But there has to be something there for them to fit into - and that's ensured by the expectation that the evening will be mostly (although not exclusively) trad.

In short, the fact that I want to roll back the process you describe doesn't mean I'm against it! I'm in favour of it happening, but I think it's gone far too far.

Add to that mix the improvisatory part of fiddle playing - the rolls, shuffles, decorations, slurs, drones, etc. - and even modern-ish tunes like these can morph into strange and wonderful variations.

That's another difference - this is just the kind of liberty that singers don't feel able to take, except in the case of traditional songs; ironically, this is one of the reasons people like me keep banging on about the need for trad. When I sing Musgrave or Lord Allenwater, the words I sing aren't exactly the same as anyone else's version, but they're still recognisably the same song. Do that to Mr Tambourine Man and you'd get looks.