"This thinking is less applicable to musics like Bluegrass, traditional Country, folk, Celtic, etc., that are characterized by smaller, closer audiences on a frequent basis in an intimate setting, hearing the instruments and players in all their corporeality."
I do not think this is necessarily a valid assumption in today's environment. Certainly, it is getting less valid with time.
Like Ted suggested, most of the musicians coming through my studio nowadays want to sound like they sound in the local folk house. mostly, this is without a mic, through a DI. They also think that, because they are in a studio, the should be miced. The result is- close micing.
And, as strange as it may seem, the audience wants the same thing. many, many audience goers today think that the sound of an acoustic guitar is that of a pickup through a DI out a PA system. when they hear a more "classically" recorded guitar, they say "that doesn't sound like soandso, it sounds strange".
As Klaus said, the reference point is changing. Or, perhaps more precisely, the reference is splintering. At one time, those having sufficient leisure time and money to go to a concert were a relatively small group. Today, one need only enough money to uy an Ipod to listen music. And there are all kinds of listeners in between.
What is the proper way to record acoustic instruments? Consider want the artist wants as an end result, consider who the intended audience is and then proceed accordingly.