We are moving into unexplored jungle here. Dick seems incapable of accepting that Music Hall pieces can become traditional, i.e., be passed on in oral tradition. In that case what is the difference between a broadside ballad like The Bonny Bunch of Roses and a Music Hall song like Jim the Carter Lad? The latter was long considered traditional and in the repertoires of many source singers, and still is to most of us. We know who wrote 'The Bonny Bunch of Roses' and he did it for commercial reasons, even if he only got a shilling for it.
Dick, you state that Music Hall songs are copyrighted. They were originally, but for the vast majority of the pre 1900 ones that were, the copyright has now expired and I know of no instance where a claim has been made by PRS on anyone singing a pre-1900 Music Hall song. The current expert on this is John Baxter. He'll be along shortly.

The simplest and least controversial way to approach this is to take the Venn diagram approach and allow for overlaps between genres, i.e., why can't a song be traditional and part of the Music Hall genre? That does not mean all Music Hall songs are folk songs, only those collected from oral traditon.

As for Jon's example, I can furnish you with numerous examples from my own family. My grandparents, my mother and some of my uncles all sang several traditional songs. However, even though I sing some of them and have done for 60 years, I did not learn them by osmosis. I was lucky enough to be able to record them in the 60s after becoming part of the folk scene. I am happy to accept that in some parts of America these boundaries are much more blurred as attested by some of the examples given above.