Traditional? based on the description in the first post, the use would limit that term to the "common man ideals" of the mid-twentieth century.....
Since time immemorial sheaths of all levels have more often than not shown embellishment of some kind, often more so then the knife or sword they housed and yet were/are also fully functional.
As others have noted embellishment can and will run the gamut - some of the makers posting here are the best of the best when it comes to making sheaths and at least some have been doing it a very long time, yet in style of embellishment they are all different....Sandy's carving can't be beat especially within the genre he carves, Paul's style of inlaying and tooling is all his own, and Dave's style of inlays and edge lacing set him apart.....yet in all three cases the embellishment is based on traditional leather crafting styles.
On the other hand a poorly designed and built sheath is still a poor sheath no matter how well embellished......
As both a long time pro knifemaker and sheath maker I've come at this subject from both ends and can say a good sheath with even a small amount of embellishment will catch the eye of a customer faster than one without and that increases business and that's good - but the embellishment must be well done, appealing to the eye, and must "fit" - just throwing on some stamping or whatever can make it worse and lower sales.
Still there are always should be a place for "plain" and anyone who makes sheaths should be able to do that when called upon - and I know that Paul, Sandy, Dave, and myself can all do that, but then again embellishment not only adds to the price, but is very satisfying to our "souls"........everybody's "soul" though is different and one should do what they choose - in the instance of sheaths it's all good when done RIGHT and done to match the knife - embellished or not there is no defintive right or wrong.........
FWIW - in regards to adding to price - I make some of the most embellished sheaths available and do it in various styles/genres, with my beaded frontier styles being the most fancy and they generally DOUBLE my income - not only do I get to do what I like most of all these days, but I get paid what it's worth - you can't beat that.......and while to some eyes those fancy sheaths may not look functional they are made so from the ground up....they may nor be one's first choice to carry while hunting but that's not all one does with a knife - for instance many of my Texas compadres have an everyday using rig, but they also have a fancy BBQ rig as well.
IMO John Baldwin in his book - Early Knives & Beaded Sheaths of the American Frontier said it best:
"The beautiful sheaths created for storing the knife elevate the knife one step higher. It celebrates the knife it houses."
Just like some folks prefer bourbon and others prefer Scotch - plain or fancy - both are good - it's all a matter of personal taste.........
Fancy is as fancy does.......
Plain and (not always so) simple...
and then there's those that are in between.......