Why would it not be? If you're talking about sampling and mixing into something like a techno piece (or what have you), it's a) no longer "folk", but of the genre that the whole piece would be part of, and b) might just encourage people to seek out the source and get interested in it.

Same holds true with taking traditional pieces and "reimagining" them into different genres - it is the style the piece is done with that it'll be remembered for in more cases than the fact it came from a "folk" source (a la Metallica's... "odd" version of Whiskey in the Jar).

As to the recording process itself, if you're talking about using the latest bells and whistles in the making of the recording - hell yes, go for it! The better sounding and more technically proficient the final product is, the better the audience you have a chance of reaching. Saying a performer must stick to an analog recording process to make it "authentic" and truly "folk" is like telling a great modern painter that they must work on cave walls with ochre and blood paints with frayed sticks, as that's "authentic".

M