Well, I come late to this party....and i know that the subject has already been pretty thoroughly exhausted, but I have my own thought on what makes a song a folk song.
I believe that folk music is the music that people play.
Some of my favorite folk tunes are also "rock and roll." Some are also "Classical." Some are "Celtic." Some are "Country."
Some tunes become "Folk" by becoming a part of the cultural consciousness over a period of years. Other tunes are born "Folk."
"Folk Song" is a label that describes a state of being rather than a style. I think that is where the confusion lies.