Unless I've missed a posting in what I think a fairly turgid mass above, no-one seems to have commented on the social side of a folk club. It is not just a place to watch star artists, promising newcomers or less-promising stalwarts, it is a place to meet people of similar interests, and make friends (or at least friendly acquaintances). If that means putting up with Joe's less-than-stellar guitar pounding on Singers' Nights, or Alice's somewhat quavery voice, well so be it. Into each life a little rain must fall. For every performer who continues to mumble along at floor level, there's another who soars with the opportunity.
Not everyone who goes to a folk club is an performer, real or potential. Some of us just love the music, or the song, or both. If we insist on high standards, we only attend when someone good is on. If we can't stand anything other than traditional, we avoid the singer-songwriters. As for blues or banjoes, the least said the better. But the clubs fill a need that sessions wouldn't begin to touch.
Folk clubs are not as popular as they were in the good old days because folk music isn't as popular as it was in the good old days. Blaming the clubs for that is a bit like blaming Morris dancers for global warming.