Folkways: Why is it important? Read what I wrote. It was documenting things that majors didnt care piss for, sounds that would never have gotten released. Folkways paved the way for labels to start doing country blues and noncommercial ethnic music. Labels like Yazoo, Arhoolie & Document totally owe their existance to Folkways, as does Nonesuch's explorer series. Click on that Folkways link and read the history, look at the discography and catalog. I think there are even MP3 samples there. Look at that stuff and it should be pretty clear why they are so important.
As far as recommendations of the ethnic stuff, it depends on what you want. There are records that are good and records that are interesting and that are both. I dont imagine you spending more than $10 on a folkways record even it I tell you it is the best record ever made, so rather than come up with a list, i suggest that if you see one and it looks interesting buy it. if you dont like it you can resell it. there is a lot of them on ebay and they go from anywhere from $5 to $100 depending on what is what. again, go through the catalog on their site and listen to samples. that is how young steve got a good calypso comp.