Re the set up referred to in Mandotim's original message, yes I've come across it, and yes it's not usually half as much fun as a live band.
On the folk scene, you're most likely to find recorded music for dancing in small folk dance clubs. At one club I attended they used records mainly because it gave them a broad repatoire of dances. However at Towersey Folk Dance Group (where I used to be a regular) dancers are spoilt by having a resident band with an impressive repatoire of tune sets and the willingness to learn new stuff if you give them enough notice.
That said I'm really looking forward to Sidmouth's Silent Folkin' Disco - that's a rather different proposition, as compared with what Mandotim describes.