I'm not sure what all the fuss was about. Classical composers and singers aren't trying to represent folk song in the way we do, they are treating it as a source from which to create a piece of music, working within the conventions and constraints of their particular genre. They treat it just as they would any other source material.
The piece has to be heard as a whole, and the intention is to create something with musical meaning, rather than just convey the verbal meaning of the lyrics.

It is also clear that classical audiences have an entirely different viewpoint from ours. This was made clear in the opening moments, when the presenter referred to a concert where he gave songs in French and German - it seems unlikely that many in the audience understood the words, but that didn't seem to hinder their enjoyment.   

In one sense there's really no difference between what classical musicians do and what, for example, folk-rock musicians do - take a piece of music and interpret it according to the conventions of their genre. There's not even that much difference from what folk revivalists do - as Eliza Carthy admitted, the folk world has its own conventions and prejudices, and ideas about what is acceptable and what isn't. Very few modern folk musicians, EC included, perform the music in the way a traditional singer in the archetypal village pub would have done.