Well, besides the age-old question of "what is folk", that we have kind of decided to ignore as unanswerable, you ask a few others, and touch on a couple of very different issues.

First, the question of whether or not one group of self-identified folkies should be allowed to define what is and what is not folk music goes back to "what is folk?". If a group in Vancouver decides that Gallic music of the Maritimes isn't folk and plastic calypso is (to use your example), I suppose that's their loss. Screw'm.   If that's the only game in town, that's too damn bad. Don't try to get in - start another game.

The other issue is a little harder to answer. First, you seem to have subsumed liberal, left and progressive, which is often not really appropriate (depending on your definitions of each, of course).   The sense of your message seems to be that what you are actually referring to is the folk singer/musician who is the next best thing to a doctrinaire Socialist.   There are certainly some of them around - there are more than a few that hang out here. Most seem satisfied if their music can keep certain issues out in front of people, make them think about problems and work toward solutions...and, IMHO, that's is just about what they can hope for. I'm not sure if any rational musician in recent decades really expected his or her singing to lead directly toward a storming of today's Bastille.

I think that plastic folkies will be with us always. I also think that, if someone from a living folk/ethnic tradition lets himself be put down and turned away by a Yuppie with a banjo, a $200,000/year day job, and a copy of Rise Up Singing, they need a self-confidence transfusion.