Pamela, Brian, literacy - I don't really know. I'm not any kind of historian, I'm just someone who plays "The Tunes" in the way we do it these days (which, broadly, is oral/aural transmission, but with a lot of literacy in the background). So don't trust me, I Know Nothing, I'm only guessing / projecting from my own experience. But, some scattered thoughts anyway ...
I think my comment earlier about the economics is relevant - it turns out that a lot of notation has been hanging about, lost in someone's attic, buried in libraries, whatever, and is surfacing now that printing and distribution doesn't cost an arm and a leg. Handwritten manuscript, not stuff put out commercially by a printing house a la Playford. Which leads me to guess that they would have been the working notes of someone who played them, spare memory. Because that seems (to me) the most likely reason for taking the trouble, given that they weren't for publication; and because it's what I do myself (it's behaviour that's beneficial in a certain context. Selection ? I'd pick up a tune by ear, maybe look for notation to clarify any details I wasn't quick enough to get hold of, and then write it down when I had it straight, because my live memory isn't big enough to hold all the tunes I've learnt at the same time. What I mean is, the abilities don't necessarily conflict). Given that musical skill would likely have been relatively sparsely distributed in a less-generally-educated time, it seems more likely that someone who played an instrument would have learnt to read & write it than someone who didn't ?
But how that (relative) literacy might have affected the actual practice of the tunes, performance, I don't know - where people got tunes from, how often they got chances to meet up with other players and swap tunes, and how they'd have done that, I don't know. Those old manuscript collections often do also contain printed material, people were learning new tunes from print as well as writing things down themselves (assuming it was them). I'm heavily biassed towards assuming oral/aural would have been predominant just because it's so much easier to do, and literate players would (surely ?) always have been a subset; even now, I meet quite a lot of players who aren't comfortable with notation, and it's not a handicap, whereas someone who can't use their ears/memory and insists on having everybody wait till they haul their sheet of paper out is a pain in the proverbs. But that may just be an artefact of my experience of the current situation.
I notice the way that song people refer to "collectors" - a sense that songs have been "snapshotted" by people who weren't part of that world, rather more than has happened with the tunes themselves. So, yes, perhaps instrumental players tended to record their own material, while singers were recorded by other people ?
I'm reminded of a comment by, I think it must have been Jack, long ago in a different place, that it could be a mistake to regard someone who played the tunes as "only" a folk musician. I think he was talking about 18C Scotland, saying that in an economy that could only support a limited number of musicians, they'd have found themselves needing to occupy all the different musical niches. String quartets for the posh people on Friday, dance tunes for the village people on Saturday, kind of thing. Also a piece by Henrik Norbeck remarking that Swedish music had a tradition of clarinet players playing polka; because one of the main ways people learnt to play an instrument was via military bands, clarinets was what they used and polkas were what the army wanted from them. I know nothing (as usual) about any such history in UK (I probably mean English, actually ?) tunes, but if you look at the Village Music Project, a lot of their 18C stuff seems to be the March of So-and-so's Militia or Lord Whatsit's Regiment (I'm not suprised they've been forgotten, either. Ahem)
I live in Lancaster (UK), where the Winder Manuscripts are a local Thing - a bunch of papers found in a farmhouse attic a few miles away, tunes written down by 3 generations of the same family. Relevant point #1 - the first of these was one John Winder, who advertised himself as a Dancing Master, working in the local Assembly Rooms. That was a Respectable Society thing - the "folk" who made use of the tunes weren't all peasants. Relevant point #2 - as I understand it, the original bundle of papers also included an amount of "West Gallery" material - hymns, church music. The same people played for dancing and for church. Sub-point - I've seen & transcribed the tune, I've never seen the church stuff; the collection as a whole got split up and went to different people - these days, "tunes" and "West Gallery" are different interests, a couple of hundred years ago they weren't. (Sub-sub-point, relevant mainly to myself - those tunes are supposed to have links to scans of the original, but they seem to be broken. Curses. I'll try and fix them).
So what am I getting at ? Pass. Perhaps, that "folk" music hasn't been entirely isolated from all the other worlds of music ? That I know nothing about the history of the concept of musical traditions, or the idea that the ones we're talking about were that separate from some of the others ? I've pointed to mechanisms that could have led instrumental players to come into contact with literacy - would there not have been equivalent stuff going on for singers ? Meaning nothing pejorative, maybe it was easier to be a singer without having to make so much commitment to identifying as a 'musician' ? (the expense of acquiring an instrument and learning to play it, for example).
Um. "Hope this helps", as they say.
Previewing this, I think it's too long. Sorry.