Looking at what's been said so far, Matthew, I think you'll see that the priorities in folk/traditional music are largely to do with proper accreditation rather than legal copyright. (I'm talking about the UK).

A traditional song can't be copyrighted. A new arrangement of a traditional song can, but it might be hard to prove that a particular chord-sequence or harmony line was truly original and not a natural development of the melody. Lyrics are often changed by a singer or arranger,but unless there was something very new and striking in the change, it would be hard to see this as anything other than the "folk process" at work.

Most people who adapt and re-arrange traditional songs are happy for others to continue where they left off and use the changes they've made. If someone writes a whole new song or a new set of lyrics to an old tune, this is new material that they're entitled to protect by copyright if they wish, but in practice many people don't mind much. What they do like (and deserve) is for their contribution to be recognised and accredited by other performers. Even in small, amateur gatherings, it's common to hear people name the composer or arranger of a particular song or version, and it's regarded as bad manners not to know or care who wrote something you sing in public, particularly if its composer is still living and performing.

Oh, and another point you mention: matching up existing sets of words with existing tunes is a time-honoured habit that has gone on for centuries. It's normally regarded as part of the tradition, rather than an original creation.

Marje