Terry Alan Hall, Cluin, Boab, I'm with you. It is all good. Enjoy what you will and can.
As to the why of this festival's choices, we may never know. I've faced the same from other venues, just as friends of mine have at still other events.
Some friends, mostly originating from the up state NY area, played in a wonderful jug band, and for years, try as they might, they could never get their foot in the door at a certain festival. Oddly, a little combo I played with was hired off the street by the event while busking in the area.
We never applied or even had any interest in performing at the festival. We were all from the Northwest and most of the band didn't even want to spend the time waiting for the event. So, when everyone in the combo I was playing with split to go back home, I stayed and did the gig with the jug band. We had a great time and a great show. The festival didn't get what they initially hired but nevertheless a very fine performance.
The combo I arrived with played our own version of Hippie/Voodoo/Acid/Oldtimey/Fiddletunes and Bluegrass/Jugband/Blues/Singer-Songwriter mayhem. The jugband I ended up doing the gig with had a great feel for the that classic old jug band blues genre and had some wild originals they they performed in that same style. Why their approach to music was not acceptable to the festival organizers is still a mystery to me.
I wasn't able to get back the following year. So, I told the boys in the jug band to go ahead and try to land a return gig at the event using the previous year's performance as a reference. I thought, since they were able to perform with me the year before, and since the show went well, it might have been enough of an introduction for the festival folks to help them get another show at the event, but they were not able to convince the event to host their performance again.
Sometimes I think that that part is the most difficult part of all of this. You enjoy music, and find that folks enjoy your efforts, and so you begin to seek out events to share what you do with others, but cannot convince those who organize the events that you are worth hosting. What do you do in response?
1) Adapt, or find material, or a combo to work with that the event 'will' find acceptable
2) Migrate, find other avenues or outlets for your talent at other events, there has to be another festival out there somewhere
Or, 3) Die, hang yourself by your own necktie, bite the bullet, slash your vital blood carrying supply lines, etc.
I keep trying those first two choices.