To me, the rhythmic difference that Al alluded to above boils down to one thing. Old-time music is meant for dancing - bluegrass music is meant for listening. Sure, it's possible to dance to bluegrass, but you just about can't help but dance to a good old time band.

Bluegrassers complain about old-time players playing the same tune for fifteen minutes, but there's something very meditative about playing in that old-time groove. I'd like to see a scientific study comparing the brainwaves of an old-time band and a bluegrass band while they're playing. I'm sure the old-time players would exhibit brainwave patterns pretty similar to those of people in a meditative state while the 'grassers' brainwaves would be closer to those of someone actively performing a task.