Oh my goodness, what a can of worms here has been opened!
I've read everyone's comments with more than usual attention. As one of those "folk artists" trying to make a living at this (an impossiblity, as another post has pointed out), I have more than a passing interest in the subject.
I think the real question here is not if it is theft or not (it most certainly is), but if the theft is detrimental to the artist. I am still not convinced that Napster, or any other site (I have found three sites that had my music for free download throughout the last several years)has cost me money.
On this note, I will say that I do not download anything I think is illegal. I don't make copies for friends. I also take fans with a grain of salt. I must remember most fans don't even realize they are taking money from an artist by copying a product...they think they are doing you a favor by passing you along to friends. And at the indi level, perhaps they are!