Steve Shaw if you substitute aural for oral tradition I might accept what you say. But: The modern world does not require oral transmission, modern rates of literacy and the growth of electronic mediums have supplanted this mode of transmission. In the modern world oral transmission is an irrelevance and probably causes much of the lyric alteration over time.(If you ever spent anytime with a single sideband transmitter you can easily understand how this happens)

"The term can be applied to music that has been evolved from rudimentary beginnings by a community uninfluenced by popular and art music and it can likewise be applied to music which has originated with an individual composer and has subsequently been absorbed into the unwritten living tradition of a community."
I regard the above as an extremely patronising statement. "Rudimentary beginnings" implies that it originated with the peasantry, poorly educated, verging on,if not actually, illiterate. Modern society has blown that assumption into touch. As has been stated, the definition is outdated and no longer fit for purpose.

"it is the re-fashioning the re-creation of the music by the community that gives it its folk-character."
This is merely an excuse for not remembering all the words and making mistakes with the tune. although I concede that certain Irish songs have certain verses deleted by some performers because of the political content.
Using the definition from 1954 would mean that the works of bards have to be disregarded and also the works of Turlough O'Carolan

On the one hand purists decry any departure from traditional works yet also insist the folk process is one of continual evolution.
Sorry boys something has to give. You cannot have it both ways.