Dave,

Arguments about "pigeon holing" are inevitable

I think the best way to look at things is whether or not a song, tune, or piece of music actually gets played or is generally accepted within so called "folk music circles"(another contentious description as opposed to its actual musical structure and/or content.

A contemporary folk song or tune is not merely a new piece which is written in the "Traditional idiom" as you have suggested. It also has to be "accepted" by performers and listeners to a greater or lesser extent.

Again what may or may not be regarded as "folk", traditional or contemporary, will also be dependent on location, the general company, and even individuals.