I think you'll find that in Western Europe, the folk traditions -- though they did exist -- were largely superseded by national politics. Even where they did exist in Western Europe, they were often added to with mythological elements to support some kind of invented nationalism. In England, with Arthurian legend, and in Germany with Nordic mythology. But, for example, the British Empire and Victoriana were always more important to the English than Arthurian legend. In that sense, it only played an important role in the Eastern European countries, which were still rural compared to Western Europe and so the folk traditions had much more of a contemporaneous meaning.
Yet, the traditions didn't play the same role in every country. In Slavic countries, nationalism was often superseded by pan-Slavism. In Ukraine folk traditions were only important as much as they were subsumed by Cossack culture, which is an entirely different entity in itself. In Yugoslav countries, besides the pan-Slavic sentiment, nationalism would also center around religious orientation.
For Hungary, folk tradition played a sort of symbolic role as the country tried to define its national identity within the Austro-Hungarian empire, to contribute in par with Austria -- which was sort of the 'Western' half of the empire to Hungary's 'Eastern' half. Hungarian music (Liszt, and later Bartok, etc), is especially famous in this regard, but it shows up in literature and painting too. The nearest thing you see to Hungary is with Poland -- folk tradition became a part of Polish nationalism -- but it shows up to a much greater degree in Hungary because of imperial politics.
I was reading a while back something about how Hungarians became experts at using the landscape of mountains and hills as part of their castle defenses. I've lost the URLs for that so I'll have to look for it again.
