Allan, the 1954 "definition" describes folk music as the product of a process of evolution by oral transmission within a community. It explicitly states that this can be applied to music which has originated with an individual composer and has subsequently been absorbed into the unwritten living tradition of a community, as well as to music which originated anonymously within that community. It is concerned with the outcome, rather than the origin. It is therefore entirely possible for a folk song to have originated from a known composer. From that point of view, composed songs which remain substantially unaltered are not "folk", no matter how popular they may be or how important a place they hold in the repertoire of that community's musicians. That might include songs which have emerged from that community but which have not yet had time to go through the evolutionary process.

However the 1954 definition was drawn up for the purposes of academic study, and most modern performers will take a broader view and consider anything from the community's repertoire. To take your earlier point, if the Scottish fiddle tradition contains a large number of composed pieces, played more or less faithfully to the original, I don't see how this is devalued because they fail to meet the academic criteria for "folk music", or that they should be of any less interest to modern performers.

It is very clear from the context of your link that the Scots Trad awards are interested in a style of music, rather than an academic study of its origins and development. There is nothing inconsistent with using terms differently in different contexts, and I see nothing inconsistent with including newly-composed material in a style which leans towards traditional Scottish music in these awards, whilst recognising that these are not (yet) "folk music" from an academic point of view.

If we could only remember this distinction between academic study and collecting, and a modern community of live amateur and professional performance, and realise we are talking about entirely separate but related things, then a lot of acrimony could be avoided.