Thurg,
Sorry; about not replying sooner. I wanted to think about the question before I went in with both feet – a tendency I'm trying to conquer! I realised that while I have held my stated view for a long time, I have really never had the opportunity to articulate it – so hear goes.
Two answers to 'creative composition'
1   I believe that within a healthy tradition, the singing of the old songs is creative composition – the songs are re-created to suit the particular community – hence 200 plus versions of Barbara Allen. I am fascinated, but not entirely convinced by David Buchan's theory that there were no set texts to the ballads, only plots, commonplaces (milk white, snowy white, dapple grey, as I roved out, etc.) and a set form by which the singers re-composed each time they sang. I thought he weakened his own argument by presenting unrepresentative representatives (Gilbert and Sullivan move over) of the tradition, but it's a lovely idea which I would very much like to be true.
2   It has been our experience in communities where the tradition is in any way healthy (West Clare and Travellers in particular) that alongside the old songs in circulation there has been a local songwriting one (or indication that there once was one). In West Clare we were recording songs that must have been composed during the singers' lifetime, mainly on the theme of political struggle, and probably the second largest subject in the repertoire, emigration. Among Travellers it was still common, so much so that we were given one song (about an arranged marriage) which we were asked not to make public because the subjects were still very much around and "He's my cousin and he'd kill me if he knew I sung it for you". I know song-making happened in Scotland among both Travellers and settled people, and I believe it once happened in England, though I can't think of many examples of the latter. It may be that the singing tradition was caught too late and the practice had stopped, or maybe the early collectors rejected the songs because they didn't recognise them as being 'traditional'. I do know we have somewhere between 30 to 40 'contemporary traditional' songs in our own collection and one of the characteristics is that they are nearly all anonymous.
Re-definition.
The re-definers seem to fall into two groups, the main one being revival singers who seem to get some sort of 'Linus blanket' comfort from describing themselves as being part of a living tradition. I used to think that this stemmed from singers and organisers using the terms 'traditional' and 'folk' as a cultural dustbin in order to give themselves a platform, whatever they were performing or presenting, but I'm not sure this isn't too simplistic. It seems from discussions I have had (including some on Mudcat), that some people define 'community' to include folk clubs and consider themselves as part of the tradition of that community, which in turn is part of the older tradition. I don't agree, but I'm not sure it's important enough to fall out of bed over, except to pedants like me.
The second group is the academics who appear to wish to give themselves a new slant on the song and musical traditions, even to the extent of denying that they never existed other than in the romantic imaginations of people like myself. One of the pioneers of this school of thought is (or was – he seems to have disappeared from the scene lately) was Dave Harker whose 'Fakelore' set out to systematically debunk virtually all the early collectors. I have to say I found 'Fakelore' a somewhat unpleasant read, basking somewhat smugly in the glow of hindsight. It certainly didn't convince me.
I haven't read Georgina Boyes' 'Imagined Village', but from what I can gather, she takes a somewhat similar line to Harker.
I witnessed one of the finest examples of both these groups at a conference I attended some years back where a nationally known revival singer turned academic showed a film she had made on the singing traditions of an East Anglian pub, which included a longish section of herself performing there. Her answer, when challenged was as she had moved in to the area she was now part of the tradition.      
Sorry; I seem to be going on far too long – as usual.
Perhaps I'll finish this by saying that the more I read countess Richard's definition, the more sense it makes to me, and if I believed it was necessary to redefine folk and tradition, that's the one I'd be prepared to think about. As it stands, I don't really thing there to be a need for radical re-definition (god, please don't tell me I have to have all my books re-bound with new titles!) – at least not till we have scrutinised the old one with a far more careful scrute.
Jim Carroll