I can't cite any specifics because I'm suffering severe brain farts today, especially since there is a chainsaw working not far away - but I would submit that some songs may have had their supernatural elements removed because of the secularization and rationalization of American society, that the supernatural elements just didn't make sense to the singers. Perhaps some songs aren't "sanitized" for puritanical reasons or for reasons of political correctness - but maybe elements of songs get lost simply because they don't have meaning to the singer because the culture has changed (or, even more simply, because the singer doesn't like it). I think it's wrong to suppose there are evil motives to every change in a folk song. After all, what's the folk process all about anyhow?
Now that the chainsaw has stopped, I can think of one example, although the "removed" elements aren't supernatural - in its pure form, The Jew's Daughter has some of the most horrible bigotry ever to be found in English-language song. By the time it evolved to the children's version of "It Rained a Mist" in America, not a trace of that bigotry was left. Was that censorship? Was that "political correctness"? I don't think so, although there might have been some of that - but chiefly, I think that singers kept the parts they found relevant and enjoyable, and let the other stuff die.
You could say the same for Babes in the Wood.

I gotta go out and check on the guy with the chainsaw, since the noise stopped. He's supposed to be cutting down the tree that blocks the entrance to my garage, so I can buy a new car this week and keep it under cover.....

-Joe Brainfart-