Awesome thread Jerry,
My 2 cents

What makes the folk process so different is what you said. Commercial music is exactly for money. The execs know what will sell to the 16-30 year old generation who spends a lot of money on CD's. Hence the music tends to be very cookie cutter. If one artist has a success others will follow the style so close that one thinks it is the same exact song. A guy I met is a big gun Nashville song writer and promoter. He said "Dan, music is money ... matters not if the song is really good or really bad ... matters if it will sell and hence the market needs to be completely tested before invested"

The folk process is from the heart. Jeri's wonderful comment
that when we hear what comes out of a heart, we tend to listen with the heart. While many songs will exists for a time due to the commercial success from a targeted population, some may, but most won't, stand the test of time. We have seen it many many times in our life with one hit wonders. Yet our children still sing "the Erie Canal" in grade school. They all Know the Wabash Cannonball.   
a song will determine its own staying value because a great song will evolve like the old wabash with 50 different lyrics and they are all great. Why will it evolve, cause people love it and make it their own. If they don't make it their own, It will cease to exist.

From a song writing standpoint, I don't think a person has to live the blues to write the blues. Nor do they need to work on a railroad to write a song about a railroad. Imagination, dedication, research, and talent will create either a great song or a not so great song. It comes from the artists gifts and their heart. Likewise if one experienced the blues or worked on a railroad it doesn't make them a better songwriter since it has little to do with melody and phrasing and song construction. Again that all exists in artist or doesn't exist ..

A talented artist would certainly find it easier to write a railroad song if they worked on a railroad but I don't think it matters much in quality if the dedication to the topic is there.

Most people will write, however, what the know about because it is easier to do. I would not want to write a sea song, I been on one boat in my life and it was a canoe ... But I suppose I could , but then I would have to hit the books talk to sailors and spend the time trying to feel the sea in my mind instead of experiencing it and it would take the fun out of it - a lot of work.