When you take a recording device out into the field, there are two things you can collect: songs (lyrics and melodies) and performances. Sharp, John Lomax, Flanders and many others collected songs. Ethically (and academically) sources should be credited in publications, but there no copyrights to deal with unless the songs were omposed by the collectees.

Performances, on the other hand, pose a stickier problem. The earliest collectors who used recorders (such as Grainger, Warner etc.) didn't have to worry much about using their recordings commercially--the quality just wasn't good enough. But the more modern collectors--people like Alan Lomax, Hamish Henderson, Mike Yates, John Cohen, Sandy Paton--collected performances that were used on (at least semi-)commercial recordings. I don't know just how these were dealt with; I also don't know how the should be dealt with.

As a folkie, I am eternally grateful to these collectors for making the music available. From a money standpoint, I doubt if there ever were a high enough volume of sales to make for significant royalties.
But, I know of folks who were recorded and feel that they were ripped off.

I don't have answers. I wish some of the collectors who frequent (or just visit) Mudcat would add their opinions.