"By this definition, folk artists are far from elitist - they exist happily within their own world, uncaring perhaps about the opinion of others"

I agree but the world of the folk revival would see such sensibilities as quite rare, 'exotic' whereas they are in fact common if you alter the definition to include contemporary manifestations of folk.
In the visual arts natural artists like Alfred Wallis have been codified in the same way as music into Art Brut, Outsider Art, Naive art or whatever to define them against the self-awareness of other artists but their kind of thing is everywhere if people care to look and don't formalise folk into insider and outsider commodities.