just to share my unschooled (and therefore of suspect quality) opinions...
There is a basic concept in the "modern" world that Music is just another commodity to be marketed. Thus you have producers of the commodity, the sellers, and the consumers. For true FOLK music to thrive, it needs to be made BY THE FOLK as part of their everyday lives. Yet our culture tells everyone to "be a consumer, not a producer, of entertainment". Can there then be a "modern folk tradition" that encompasses the mainstream culture, when the people in that culture refuse to make their own music?
In the 1735 discussion, it appears that the concern was not so much about music, per se, but rather that the content of some of the popular ballads tended to encourage the breakdown of class consciousness in impressionable youth. Since "everyone knows Democracy is a Good Thing", then this change of values and breakdown of a traditional culture was something to be desired. (The victors/survivors always say the previous regime needed to be replaced)
You could say that Folk Music (or for that matter, such arts as Rap) COULD be a tool for similar sedition today. If you convince enough kids that they can make their own music, maybe they won't have to consume somebody else's? That would be one small step away from the Consumer Culture. I doubt it'll happen, but it's an interesting fancy.
As for ballads in today's music market, I think today's emphasis on visual communication has cut into the pervue formerly held by storytellers & balladeers. Add to that the emphasis on quick communication over deep communication (exemplified by Instant Messaging and CNN Soundbytes) and the result is a shorter attention span for (almost) all consumers.
If I may say so, frequenters of this board are (with all due respect) rather different from "the people" of the modern industrialized Corporatocracy - if for no other reason than that we are producers of music rather than consumers. Thus our perceptions are likely warped by comparison to "the mainstream". Personally, I think that's a good thing. And I'm glad there are a few eccentric corners of the world where some traditions are kept at least somewhat alive and where not everybody is a drone consumer (no, I'm not talking about eating bagpipes!)