Acoustic instruments predominated because that's all there were. Retrospectively, we can look back and organize by genre, separating the old time from the folk, but back then it was all just music. And, we can take that even further: it was pop music, though from a time before it was enveloped by industry.
"Stagger Lee," the song that begins this set, is a great example of the period. Harry Smith included a version of that song, titled "Stakerlee," in his "Anthology of American Folk Music," sung by Frank Hutchinson. That version sounds archaic to us today, but it was a professional pop recording of its time -- inasmuch as such a thing existed. The Foghorn Stringband performs it beautifully, letting the song and the feel of the music really speak for itself.
That song remained in the hands of the folk community, though another song in this set, "Homestead on the Farm," eventually became more-or-less the property of the bluegrass crowd via a popular recording made by the Carter Family, a band that was in it's time as famous as Michael Jackson was in his. It's another example of how the genre divisions that we have today weren't always with us, and actually probably don't serve us all that well.
In any case, we can look at the history of all of this, and there is a certain fun or gee-whiz quality to all of that, but the Foghorn Stringband thankfully doesn't treat the music as a museum exhibit. Rather, they bring it life through an honest and careful virtuosity. At the end of the day it's just great stuff. This material, and indeed everything they lay their hands on, is a delight.