In my opinion, neofolk represents the most nostalgic, melancholic, sentimental, and genuinely world-weary side of the gothic subculture......

It's a genre that oddly developed alongside the martial industrial genre, and for that reason, has occasionally incorporated trappings such as dark martial drumming, Nationalistic themes, and uniform fetish fashion.

But at it's root, pure neofolk provides that fix of pure beauty and sadness that few other genres touch, and comes at times as one of my only comforts in times of pain, grief, or general world-weary stress of everyday existence.

Some of my favorites:

Of the Wand and the Moon
In Gowan Ring
Fire + Ice
Unto Ashes
Sonne Hagal
Death In June
Sol Invictus
Romowe Rikoito
some of the more folkish Ordo Rosarius Equilibrio material

Any others on here entranced by the beauty of sorrow this genre has to offer??

http://www.youtube.com/watch?v=alxRD2j_yqo
http://www.youtube.com/watch?v=K3w1Q0h38vs
http://www.youtube.com/watch?v=siRzVkcBEu0
http://www.youtube.com/watch?v=rzER59SXrJI
http://www.youtube.com/watch?v=is8VuqeNKcM

That's a very beautiful description you wrote about it. I love this genre too.
Altough I am not sure if all of these bands can be labeled neofolk or rather neoclassical as I am not quite sure where is the border between them. But I really like: Ataraxia, Ordo Rosarius Equilibrio, Trobar de Morte, Dark Sanctuary, Unto Ashes, Aythis, Ophelia's Dream, Azam Ali, Autumn Tears. Also Värttinnä and Braagas (yay, from my country - Czech!) are very folk-ish but they don't have the sadness you describe.
But from the bands in your list I have heard only two. I'm going to play the videos and try to look up more by those bands too to get to know more!

Yes, I enjoy neofolk very much. I really like Lux Interna, and Unto Ashes is one of my very favorite bands.

I love neofolk bands, and we share an interest in many of the bands you listed. It is quite a vague term (like darkwave), which isn't a bad thing. I like the folkish stuff and the more martial industrial material. I think my favorite would be The Moon Lay Hidden Beneath a Cloud.

The only thing that makes me squint my eye a little would be all of the accusations that bands like Death in June and Sol Invictus are far right-wing neo-Nazis, and I think the thing that bugs me is that I'm black but I enjoy them anyhow (even though they might not hold those beliefs). '_'

Unto Ashes is one of my favorite bands. I agree with your description. Neofolk is a wonderful genre of music.

I can understand your feelings, as my wife is Japanese, and I've also got Native American blood on my mum's side, yet there are quite a few bands in the black metal, martial industrial, and neofolk scene I still listen to who've espoused racist views in the past(listening to Graveland while wearing a Burzum t-shirt right now).
I try not to take it all that seriously, and try to take in only the part of the music/art that inspires me. I see nothing wrong at all with pro-traditionalism and anti-modernism, which is a belief I've come to adopt in the past couple years in the altruistic/romantic sense, but when it turns towards racism(which is actually quite modern) is when I draw the line.
The only connection to Death in June/Sol Invictus to National Socialism(beyond provocative imagery) is Tony Wakeford's(and Ian Reed's) past in the British National Front, which they've long since repented of.

As for where to draw the line between neofolk, neoclassical, and darkwave..... well, there's been lots of crossing over, with Ordo Rosarius Equilibrio being one of the main examples.
However, I think the difference is more in the roots. Neofolk was more directly rooted in the post-punk and industrial music scenes, while neoclassical darkwave I believe was inspired by neofolk, and added more dark ambient, classical music, darkwave(as in "dark new wave"), and 4AD-inspired ethereal textures.
Neofolk tends to be more acoustic/organic, while neoclassical darkwave tends more towards synthetic/electronic textures.