One of my favorite folk standards is "Wayfaring Stranger" that I've heard covered by:
Jack White (Cold Mountain)
Johnny Cash (American 3)
Neko Case (Tigers Have Spoken)
The thing that I absolutely love about folk standards is that they become refined over the years taking out the cheese, superfluous pieces, they get stripped bear, right down to whats essential and depending on how an artist takes it, gets things added to it based on whats good for that performance. Another one of these songs that I'd probably say has been refined enough to be perfect is:
House of the Rising Sun
Sinead O'conner
The Animals
Tracy Chapman (redone as jazz ::rawr:
Theres some up an coming ones right now with modern music. Johnny Cash and Tom Waits get covered ad neasum. Springsteen's cover of "my Ride is here" is nothing short of amazing, and I think everyone on the planet has heard a cover version of "all along the watchtower"