"On one hand you say that folk clubs should do what it says on the tin and present folk music"
I have never had a problem with clubs which present traditional songs and singers and also those who use the idiom of traditional songs to create new ones - I have never argued otherwise.
However, when I discuss, lecture, write about folk song, I always try to make a distinction between the older songs and the newer ones, for exactly the reasons I have laid out here.
My real problem has always been with the clubs and the performers who have used the term 'folk' to promote songs that aren't and have no relation to the genuine object.
My arguments on 'what is genuine folk' are to do with my interests as a researcher - my gripe with the clubs is with those who have wasted my and many other people's time in searching for something that they are not offering in any shape or form.
You want examples of what I mean - try some of MacColls and Seeger's,   compositions (not all), or Pete Smith's, or Matt Armour's, or Ed Pickford's, or Helen Fullarton's, or Graem Miles's, or Jerry Springs's, or Don Lange's or Dick Snell's, Eric Bogles, or Miles Wooton's, Con 'Fada O'Driscoll's, or Adam McNaughton's, or Sean Mone's or Fintan Vallely's or Tim Lyons', or Brian O'Rourk's, or Gordon McCulloch's, or Enoch Kent's, or Hazel Dickson's, or Colin Meadows's, or Donniell Kennedy's or Jack Warshaw's..... all have produced songs in the traditional idiom which have given me enjoyment at one time or another - even tried my had at some myself, given the opportunity.   
Derrick
I can only speak for my own experiences and those of people I know, who exited the scene as I did for the same reasons many of whom I am still on contact with through our still mutual interest in folk song.
It really isn't as if I'm taking about a small handful of clubs in a few English backwaters - my direct experience has been with clubs in three major English cities, and those I have worked with cover a good section of the British Isles through personal contact.
I've often been accused - usually by Bryan, of being out-of-touch with what has happening now because of our move to Ireland - even if I had never been in contact, the internet has been indication enough of the prevailing situation - no place to hide nowadays.
Jim Carroll