I see no reason why they should not wash properly if not folded, in fact they would probably wash better. If sheets and duvet covers are folded and do not unfold during the wash the parts of the sheets/duvet cover in the middle of the package are unlikely to get as thoroughly washed as thoise layerson the outside.
I would also think that folded bedlinen would be more likely to de-stable a washing machine because it forms a compact water-soaked heavy item, like a bath mat. If they go in unfolded, yes, you can find stuff all mixed with the bedlinen at the end of the wash, but at least all the item gets an equal exposure to the water, suds and spinning.