It's really "horses for courses". Steel-strings - I would say - give better sustain, and that might be important. Also, steel are certainly better for bending notes. Not many famous folk artists have used nylon. Peter, Paul and Mary did; well, Peter and Paul did. But, as a previous poster pointed out, some artists - like Jose Feliciano -get a fantastic sound using nylon, and if it's it good enough for Paco de Lucia ...