A diegesis does not require a filter, and to assert that the narrative or continuity with history postulated by the Karpeles 1954 definition is necessarily sealed, retrospective and finite is only true if you accept the Sharp conclusion (which I do not) that a folk song must be anonymous. Otherwise, it follows from the Karpeles definition that the body of "folk" may continue to benefit from accretion.

It also follows from the Karpeles definition that the composed "folk-style" tunes (and equivalent songs) mentioned by michaelR may accrete to the body of "folk" when they have been adopted and modified in transition, as say "Ride on" has been.