I just want to preface this by saying I don't hate this theme. But I wanted to give my views on why I think it is a weak theme and also to hear from some Folklore fans to understand why you think it is a strong theme.
So firstly the reason why I don't hate it, it's not too limiting. The absolute worst themes are the ones that limit everyone to very similar games, either genre or gameplay-wise. Something like Harvest is a perfect example of this. 90% of the games were farming related and the other 9% were organ harvesting. Only very few games here were truly unique. This mostly comes down to that theme being far too limiting.
Folklore by contrast is not limiting. You can interpret it as ancient folklore like myths and legends, medieval folklore like fairy tales or modern folklore like urban legends.
But here is where the problem arises. It's almost too open ended. It gives basically no direction for what sort of game to make. And so people may just force fit their favourite idea into it with a splash of folklore paint. That isn't the most inspiring or imaginative take. In my opinion the best themes are ones where they guide you to certain types of gameplay or elements but without being so limiting that everyone does the exact same type.
The next point is it being too story heavy rather than gameplay. Folklore is as it says folk lore. By it's very nature it is story focused. This may force more narrative heavy games at the consequence of mechanics. I prefer themes that can limit both to some degree. I do like story driven games but I don't believe they are ideal fits for game jams. Where time is limited in order to make a compelling story you have to sacrifice gameplay. I feel like fundamentally gameplay is the most important part of a game.
The last critique I have is the lack of originality. This one I could be proven wrong on but I would expect a lot of people to stick to more traditional folklore such as fairy tales or Greek myths. It's harder to take risks when you are limited in setting and narrative.
I'll get off my soap box now. But I would love to hear from others what they think.