"A society where most music that people listen to is sung and played by those people themselves is different from a society where most of it's recorded"

I don't like to quibble (seriously) because we have common ground and your distinction is a reasonable one, but society is different? It's reception of music is different certainly but the inference - and not only your's - is that society in a wider social-political sense was altered by the way music was embedded and history doesn't appear to bear that out. I feel it's a question of degree and that pre-mechanical music and post-commercial recording are only one way of cutting the cake and not an especially revealing one.
There are broadsides and there are reflections on local and national politics but that's some way from making the case that music somehow mobilised a view of the common condition that was transformational. That's not to say it didn't happen but I don't see it being abundant enough to be defining.

The fear has to be that 'folk' is a post-rationalisation of music that neutralises it by guarding its temporal frontiers, in short, it separates popular music's commonality and impulses by an expedient of technological change. It sees the widespread sale of recording as limiting some natural instinct to perform and listen, rather than say, a relief from the necessity of hearing the same thing over without marked expertise or ready adaptation, in much the way that early cinema goers perceived British film as being 'retarded' compared to the cinemas of Russia, Sweden and the US.

The principal definitions of what and who folk are don't appear to receive the same on-going enquiry as other forms because there's still a low-brow and high-brow sense that folk is simplistic and absurd which is componded by the certainty among enthusiasts that concensus has been reached on meaning when - as even this board will tell you - it really hasn't.