There isn't a way of knowing EXACTLY how people played back then, but we can get some pretty good ideas and come pretty close if we do some careful reading and studying.
I, personally, believe that what makes us human beings has not changed significantly, and therefore art from the past retains its significance. If one follows the argument that everything should change, then my argument is that Bach's music should be entirely discarded because it could be nothing but an inferior ancestor of present-day aesthetics. It is my view that this is not true, that the music of the past AND what it intended to say are quite relevant to the present. Our basic humanity has not changed.
Should we completely rewrite Shakespeare in modern language? I don't think it's possible to do so and retain Shakespeare--it would result in something completely different. In the same way, if one wants to play BACH, then one needs to try to understand not only WHAT Bach was saying but HOW he said it. Yes, it takes some effort, just like appreciating Shakespeare does. But to do otherwise is to risk missing the point of either artist.
Art is different from technology. It does not improve, it only changes and becomes different. Beethoven is not better than Bach, nor is a modern organ better than a Silbermann. They are simply different.
One of the most important and truest values of the arts is that they open our minds to the aesthetics and ideas of other cultures and other times--of other people. To be ethnocentric, culture-centric, or even era-centric (in other words, to believe that modern is better and anything that is DIFFERENT is IRRELEVANT) is, in my opinion, completely missing the point of the arts. The very thing they can teach us is how to appreciate people of different times, cultures, and aesthetics. Their value is in OPENING our minds, not CLOSING them. To learn about the instruments and performing practices of the past is not closed-minded rule making academics, but just the opposite--it's the appreciation of something different. To insist on modernity and the irrelevance of the past is, in my opinion, the closed-minded approach. However, I will agree that a mindless attempt to recreate a single performance of the past is stagnant. Surely Bach would have changed his approach over the years and from one day to the next. The goal is to play his music in a way that he would have recognized, and within the bounds of using historic techniques, there is quite a bit of flexibility now, just as there was in Bach's day. To be rigid would NOT be historically informed.