So, nickr90, "today's (?)folk and traditional songs and tunes were the pop of their time" were they? Well, if they are "today's" their time is 'now' and they're not 'pop' now, are they?
If I stop being a pedantic old git for a minute (but it gives me such pleasure!!!), are you are saying that they were once 'pop' music and once had the same status as today's pop music? I would have to say that this is a gross oversimplification and highly debatable. It also doesn't get us much further towards answering the question about whether Eliza Carthy is 'pop' or 'folk'. I would say that Ms Carthy is definitely popular within the Folk community and possibly beyond it.
On the categorisation debate, my view is that definitions and categories are useful. It can be difficult to realise comprehensive definitions - but trying to achieve such definitions can be very enlightening. I notice that those who are anti-definition/categorisation seem to be completely at home with crass marketing definitions - eg. anything 'acoustic' is 'folk' - including military band music!