"...just how limited an audience there is (as in, little or none) for exclusively traditional songs..."

There's the problem, no? Performers who do strictly, exclusively, trad material will have a hard time getting gigs. Therefore, if you want an audience, it makes sense to mix it up a bit and include more recent material, and perhaps more modern arrangements. There are a lot of good songs around that fit the bill, whether for a solo performer or a band.

IMO, all this squabbling about whether they can be called "folk" is silly. People DO call them that, for better or worse. It's pointless trying to push the river. 1954 was a loooong time ago.