It seems to me there are two versions of the broader definition, both fuzzy but in different ways. There's "six degrees of separation" folk music, which starts from yer actual folk but radiates outwards - new songs in a trad style, new songs in an affectedly archaic style, trad songs in a contemporary style, new songs in a contemporary style by somebody who's known as a folk artist... When people say folk is a 'sound', what they usually seem to be thinking of is the next stage after all of those: new songs in a style emulating - and modifying - one of the many sounds which have been used by people known as folk artists. There are a lot of people working in that broad area; it's a healthy enough scene, but there's nothing at all that unites it - musically, lyrically or in terms of instrumentation.

This overlaps with another broad definition, "you bring it, you sing it" folk music. My local club is very much of this persuasion: we've had honky-tonk piano, we've had classical guitar, we've had songs by the Seekers and the Snow Patrol. Lyric sheets are common and sheet music is not unknown. Again, there's nothing at all that unites everyone in the area (although the acoustic guitar comes close).

The only thing that those two definitions have in common is that they've got very little room for traditional music. I think that's a shame.