To me, as far as song accompaniment is concerned, a good instrumentalist is one who can accompany. The instrument should be playing a supporting role. If you want to show off your stunning dexterity, play some instrumentals, but the songs, if accompanied, should be supported by the accompaniment, and not be in competition with it. As the performer, it is up to you how you accompany the song, and there are no rules about how to accompany a folk song, any more than there are rules about how to accompany anything else. You play what seems appropriate to you, and it is up to the listener what they think about your performance, but I think your guiding principle should be what's appropriate to tell the story. I agree that it seems nowadays that instrumental prowess, and vocal gimmickry (as opposed to traditional singing styles) seem to be taking over. Many of the young performers seem to be using more pop oriented singing styles, which I find distracting. This will be seized upon by some mudcatters as me being a curmudgeonly old git. It isn't. We were all young a few years (be honest - decades) back, but I don't seem to remember this kind of delivery being prevalent then. (Although, on reflection, there used to be a kind of 'folksinger's voice' adopted my some, which, thankfully, seems to have pretty well disappeared). In pop and rock music, the singer is pretending that the song is about them; in folk, we are telling someone else's story (which is also why it doesn't matter what gender the singer is). And modern popular music is essentially dance music, and the words are less important. In folk, the songs were traditionally for listening to; the dance music was instrumental. So the instrumental accompaniment, if there is one (and remember that it's only an option) is serving a different function from dance music.
Incidentally, I'm also getting somewhat disenchanted with the guitar in folk music. Nothing wrong with the instrument, but just check back through the thread. The assumption seems to be that 'accompaniment' means 'guitar'. Look through a few club websites, or folk magazines, and count the guitars. There are numerous other options, which create different moods. Some people find the guitar a bit bland. And, of course, many people in the folk world find any accompaniment a distraction. It is about the song - the story, but what people appreciate is the way a particular performer draws them into that story.

John Kelly.