Surely one of the functions of folk is to give us a historical perspective

I wouldn't call Mad Maudlin 'folk' at all. It is, as Big Al suggests, a chilling piece of exploitative voyuerism which views psychosis as some sort of 'entertainment'. It only becomes folk (a Steamfolk classic indeed) with the new tune, which effectively santises it into something else entirely, whereby it operates at a yet further cultural remove for the benefit of a more genteel sort of 'Horrible Histories' sort-of hindsight. But the original text (and far superior melody) is part of a once-fashionable genre of 'mad songs' that went along with the once-fashionable recreation of popping in at the local asylum for a bit of a laugh.

As a poem it exists as a surreal and romantic fantasy of mental illness; the old tune gives it a quite sort of dignity absent from the 'macrame beat' histrionics of the new one, which, as I suggest, is what brings this song into the Folk Sphere. Otherwise it belongs with the other body of Mad Songs which are very much the reserve of Early Music - see Catharine Bott's wonderful album of same: Mad Songs which includes Tom of Bedlam. As BAW says: chilling indeed. Not the song, but the attitudes to Mental Health issues over the years.