Hmmm not sure if this comes somewhere under the folk/international banner;
Passion, Grace and Fire - John McLaughlin, Al Di Meola, Paco De Lucia (1983)
Certainly acoustic, not entirely sure it's folk. Some brilliant spanish guitar though.
Just some extra info from the liner notes. Al Di Meola plays in the left channel, Paco De Lucia in the right channel and John McLaughlin in centre.