I've certainly enjoyed this thread but I must confess that I haven't managed to figured out what "traditional" means in its context. No such problems with (the dreaeded) "singer/songwriter".

Anyway,
I know of lots of festivals where the performers are predominantly what I think of as "traditional."

They are all in the southeastern US.

Just a few examples off the top of my head: WV State Folk Festival (Glenville WV) Vandalia Gathering (Charleston WV) Seedtime on the Cumberland (Whitesville KY), Mount Airy Bluegrass and Old-Time Fiddlers' Convention (Mount Airy NC), etc.

Whether the other participants in this thread would agree that performers like Lester McCumbers (WV) and Lee Sexton (KY) are traditional, I can assure you that they are NOT singer/songwriters.
I can also guaranteee that you won't run into many singer/songwriters at these events.

As for the singer/songwriter plague, it seems to me that no matter what the attitudes and motives were in the beginning, the people who now run and book the sorts of festivals referred to in this thread got trapped in the sort of CEO mentality that thinks that growth is essential, growth is good, and bigger is better.

Trouble is, big festivals require big audiences. Big audiences require big names. Traditional musicians, almost by definition, cannot possibly be big enough these days. People like Ralph Stanley and Natalie McMaster are the perfect exceptions which prove the rule.

The point is that these days if you are going to feature traditional music at a festival you seriously have to think outside the box. But big festivals don't reward thinking outside the box.

Most people involved in the big festivals either don't remember or never knew that in the "old days" folk music was all about thinking outside the box. In the old days you didn't invite Granny Riddle to your festival because you thought she'd be a big draw. You invited her because her music deserved attention no matter what its commercial potential.

A notable exception to the above was this year's National Folklife Festival in DC. The Smithsonian brought in truckloads of truly great truly traditional musicians.