It's the "making a profit" which is the point. If it's a truly commercial event, run for profit, then I'm inclined to agree and I would generally expect to get paid. But most festivals are not run on this basis - most are not-for-profit and any surplus they make is ploughed back into next year's festival (and often supporting other activities). The organisers and a lot of other people put a great deal of time and effort into running these for no pay, because they and everyone else get a great deal of enjoyment from the event. Those musicians who choose to perform for free do so for the same reasons.

The fact that a few headliners might get paid doesn't detract from this, because they are part of the draw which makes the event attractive in the first place. No one resents this, or if they do they are not obliged to perform.

The bigger festivals with bigger budgets usually manage to pay the most of the booked performers. But even these provide opportunities for unpaid people to perform, because that is what people demand. I wouldn't go to a festival which didn't offer opportunities for playing or singing, no matter who was on the programme

This is very different from those contractors who are brought in to provide the support services needed to make the event run. They may have no interest in folk music or in the event. For them it is a job of work like any other, and they quite rightly expect to get paid the going rate.

You persist in seeing this as exploitation. In most cases it's not, and in most cases the musicians themselves are perfectly capable of recognising when it is.