Today's Times has an article about the Greenmarkets in New York that is fairly interesting (though I really, really hate that they refer to organic farmers' concerns about Walmart's organic initiative as "handwringing"). Here's my take: I don't care if a farmer's market includes jams made from imported sugar or pottery or corn husks dolls or bread baked with non-local flour as long as 1) local farmers are not turned away in favor of vendors of non-local products and 2) everything is clearly labelled.
Transparency is the key. Not everyone cares about whether the flour is local, and I would still rather support a local baker using non-local ingredients than a national chain that also uses non-local ingredients. Just let me know what's going on. At least in the Northeast, the easiest way to find out how things have been grown is by asking the vendor. In most cases, they are deeply involved in production and can tell you everything you need to know.