Another possibility is to have your music session before the start of the dance. You may or may not want to offer discounted admission to the dance to the people who come to the music session as well. Either way, the person whose name is missing above was right in saying that it takes a long time to develop an audience.

You can also try to start a regular session in your living room. Start by inviting the people who used to come to the folk club, and encourage them to bring friends. Expect that you will need to make a lot of phone calls before each session, to remind people that it is happening and to encourage them to come.

I don't know what to do about the bands that claim ownership of tunes. If it's the local custom, it might be pointless to fight it.