"I think that what's at the core of the very question -- the question of "where have the American audiences gone?" "

Just a reminder, that was NOT the original question of this thread. The question was, HAVE the American audiences gone. I think you answered that Don when you mentioned that:
"Among the hundreds of thousands who attend and the thousands of performers (heavy in the singer-songwriters), if you creep up into one of the meeting rooms in the northwest corner of the grounds at the right time, you might actually hear a traditional folk song or two."

I think that sums up. The audience is there and "folk" music is now being recognized for ALL the flavors and styles.