Leeneia - your take on the origin of the mediaeval mode system seems pretty much right (except that organs weren't used in church wen it was invented). There were a a whole bunch of chants that needed to be organized for performance by relatively untrained singers, and it's hard to switch mode in mid-performance if you're not used to it. So it worked better if you could stick to the same mode for the whole service (or maybe the whole day, or in the case of the Syriac church, all week). This implied a classification system. (A further consequence was that whatever didn't fit that system became officially deprecated, and survived only in isolated areas, like Mozarabic or Ambrosian chant).

However. That is not what many other people have wanted a mode system for, and it certainly isn't how traditional music has worked for centuries. Folk performers switch mode very fast, maybe several times in the same tune. But these switches of mode correspond to changes in technique, melodic style and harmony, so knowing when they occur is useful (and is just as useful even if you don't use the standard musicological labels for them). Also, folk music uses a much larger variety of modes than the nine recognized by the late mediaeval Church. So modal systems for folk music have be a lot more complex and flexible, and have to be capable of labelling much smaller chunks of music. (The modal systems used by jazzers take it even further, but they're nuts).