The universal and timeless nature of our songs made them still relevant and the forms used to create them were as usable as they ever where to create new songs (which could never become folk unless a new oral tradition was established allowing the populace to absorb them into their creative culture)

I think I can half understand what you are saying. The drawback if I understand you correctly, is that travellers would be the only authentic source left. But to accept that I would need to be sure that they have no radios, TV,internet or any other device that plays, records music,in order the traditional "derivation" was uncorrupted and unpolluted. That argument may well have held true in the 50s and 60s, but it is increasingly difficult to be totally divorced from being battered by a constant stream of music in today's world- you cannot even buy a supermarket loaf without an earbashing.
To me this means that traditional means of creation and mutation have essentially ceased, modern creation of folk is by wordsmiths and tunesmiths, the modern world is too busy and too full of distractions for the old ways to survive, If you can accept that the words and tunes change as part of the folk process then why is it such a problem to accept the means of composition/generation have changed. With electronic transmission available for both music and lyrics it is unlikely modern folk will mutate with transmission.
In a nutshell I would suggest modern folk is just a transition from the old traditional folk and this transition was driven by changes in the modern world. So old and new in reality are one and the same, with the new constrained/driven/created by the impact of the modern world.