Point of View
Folk tales often address an experience that occurs mainly outdoors or in a visible physical space, whereas short stories can happen almost entirely within one person's head. A folk tale can explain the origin and composition of the Grand Canyon, while a short story will frequently dwell on the origin and composition of a particular character's outlook. Additionally, folk tales are told from a third-person perspective, whereas short stories can be told from the first-person point of view of a character.
Individual Experiences vs. Broadly Shared Experiences
Folk tales describe a universal experience that everyone has had, whether it is making bread, falling in love or having to face an enemy. The feelings of the characters in the story are rarely given much notice; instead, the actions of the characters drive the narrative. Short stories often illuminate an individual character's feelings, while the action plays more of a supportive role. While short stories can also describe these universal experiences, they rarely end with a blatant explanation or moral in the same way that folk tales do.
Because they are almost always explanations for geographical formations, traditions or similar behaviors, folk tales are universally acknowledged to have occurred in the past. Short stories can occur in the past, but writers just as frequently employ the present tense. In some instances, short stories take place in the future.
Folk tales intend to convey an all-encompassing truth that is frequently enormous in physical scale. Navajo folk tales describe the origin of the sun, or why the wind blows in a certain direction. Short stories have a smaller scale. They convey the reality of emotional states. While emotional states arguably have no measurable physical scale, a short story that delineates the alienation of 20th century man is not the same as a folk tale that explains why the moon occasionally waxes gibbous.