Hi Jo, as you know I am in Australia and I have been selling on MadeIt, the Australian Etsy, for 14 months before I decided to take the big step and move to Etsy. I have been here 2 months now and have had 19 sales, about half of them in Australia and the rest in the US, UK, Canada and the Netherlands.
I was doing quite well on MadeIt but it's a small site compared to Etsy and I am happy to have a larger 'audience' now. I expect it is the same with Folksy.
For me the fact that an item I buy on Etsy comes from another country is part of its charm. I have a lovely necklace from Greece, earrings from Croatia, buttons made out of beach items from England... I hope and think that many Etsy buyers feel the same way! I think it's one of the great things of Etsy. In my treasuries I always try to feature items from many different countries.
I know there are some bestselling shops on Etsy that are outside of the States, so I shouldn't worry too much. And you have the added advantage that your items aren't expensive to ship!
Having said that, I would give Folksy a go as well if I were you. I think I will keep my MadeIt shop on too, although I have really neglected it in the last few months...
Good luck!