Can dancing as entertainment, with a non-participatory audience, be considered folk dancing? I could argue that question from either side, depending on if I'm looking at folk arts from a process point of view or from a literal point of view.

To put it in more familiar (to me, at least) musical terms, a classical string quartet playing an arrangement of a traditional Irish tune is, without doubt, playing a traditional Irish tune. That's the literal definition. From a process point of view, they are playing almost the exact opposite of traditional Irish music. Not only did they get to the music in a completely different way, but there will be lots of nuances in their performance that are foreign to traditional playing styles, just as there are lots of things in these dances that are not usually seen in "genuine" folk dancing. I guess what I'm saying is that without a definition of "genuine" the answer is both yes and no. As soon as we know what genuine means, we can land on one side or the other.