Ancient Greek Folly?

I'm still having fun reading the ancient Greeks. I'm about a third of the way through Thucydides, so I've been learning a lot about ancient warfare, and modern and ancient rhetoric. When it comes to war and politics, I think my favorite thing about the classical Greeks is their deep and abiding cynicism.

Which brings me to Plato's Republic. It provides one of the early selections in the Norton Anthology of Theory & Criticism that I've also been working through at odd hours. I remember reading the Republic for the first time, and thinking that when Socrates (or Plato) talked about literature, he must have been having a little fun at the expense of his interlocutor. After all, he proposes throwing out huge amounts of literature that we consider treasures of the Western world, including large chunks of Homer. Considering that even back then Homeric poetry was revered, I thought he must have had his tongue at least partly in cheek.

Coming across these arguments again in the Norton Anthology, I'm trying to give them their due. But is there any reason not to throw out all of his points? Is there any value in insisting that fiction literature be only upstanding, moral, virtuous, and educational; encouraging only right behavior and never giving examples of wrong action? I understand that there are probably still some folks who think this way--and any form of entertainment aimed at children will always be under a lot more scrutiny (see the cyclic uproars about: rap lyrics, video games, LGBT-positive children's stories, etc). But it seems both futile & silly.

Reading some of the Great Classics of Western Literature, I've noticed that some of them, especially those stemming from the oral tradition, probably survived partly because of their appeal to children. And in the same way that kids can watch a funny car-crash scene from Toy Story 2 twenty times in succession without any diminishing enjoyment, I can imagine some child from 2000 years ago saying "Tell it again, tell it again, Grandpa! Tell how the hero hit the bad guy so hard that his EYES flew out!" (from the Iliad). Or 1000 years ago: "Tell how Beowulf tore the monster's ARM off and BEAT him with it!" And let's not even get started on the Canterbury Tales. If you applied Socrates' standard to all literature, you'd have to throw out so much of what we now consider classic. Midsummer Night's Dream--gone!

Is there any defense of this approach today, or can I put it out of my mind? I don't want to dismiss it out of hand if there's something I'm missing, but I can't see it having much value in my own approach to literary criticism.

When it comes to the Norton Anthology, I'm looking forward to getting into Aristotle, who comes next. I haven't read Poetics or On Rhetoric before, and suspect that I'll find something that, if not more useful, will at least be new (to me).