I believe there was an earlier thread on the subject. The explanation of the term that makes the most sense to me is that the term was coined by the 17th century blind harper, Turlough O' Carolan. According to this explanation, planxty is a corruption of the Irish word slainte. Slainte means "health" so planxty then is used to designate a tune to the health of Irwin, Mary O' Neil, etc. The story goes that if O'Carolan was pleased with the hospitality accorded him, he would write a tune to the health of his hosts.

All the best,

Big Mick