The think is, Jim, as you very well know, the word 'folk' hasn't meant exclusively traditional music for well over half a century. In my experience, not as long as yours but nevertheless going back over 45 years, 'folk clubs' have always presented a range of music across the spectrum of the broader meaning of 'folk'. Some clubs were more towards the traditional end, others towards the contemporary end of the scale. I can think of very few which were exclusively and deliberately one or the other, and they were often careful to differentiate themselves.

I would share your disappointment at going to a folk club and not hearing any traditional folk songs, and I probably wouldn't go again, but I don't agree that would disqualify it from using the label if what it did provide fell within the wider understanding of the word. Anyway I doubt whether such clubs are in fact as common as you suggest. Of course if it consisted mostly of acoustic covers of pop songs then I would be entirely on your side.

As for whether this damages traditional music, I am not so sure. I know that my route into traditional music was via the Spinners, who mixed traditional songs with recently-composed ones, albeit both written and performed in a folky style. If people are exposed to some traditional music while looking for something else it may trigger their interest. There now seems to be a considerable number of young musicians performing wholly or mainly traditional material, so I think the music is in safe hands.

The reason I no longer go to folk clubs is less the nature of the material than the quality of performance (at risk of reviving yet another well-worn topic). The old folk club model of professional guests with selected floor singers has mostly been replaced by all-comers singarounds. I'm not prepared to sit through long hours of often poor performances, whether or not of traditional songs, for the chance to do a couple myself. I prefer to spend my time in tune sessions where I can play all evening.