In general I would agree that classical trained singers often mangle traditional songs, but there are exceptions. Judy Collins is one. Have a listen to Rhiannon Giddens of the Carolina Chocolate Drops. Two Time Loser couldn't be done better, and then there is the incredible Ladino song "A La Una Yo Naci". Rhiannon is classically trained, but while that certainly contributes to her range and lovely voice tone, it doesn't get in the way of her singing when she goes traditional.

I also have a CD of traditional Appalachian ballads by Custer LaRue. She's very "classical" in her approach, but I still enjoy the songs.