That's 'ceol'; and nearly as likely as a reference to the blacksmith's choice of eye makeup.

On similar lines, certain amateur folklorists of the early 20th century desperately wanted this to be an ancient pagan survival, so that the Coles could be King Cole and his namesakes (there had to be three of them in order for it to be really significant, of course; and ideally spelled Coel) but frankly, the Baring-Gould fragment (in which they are all goats) is probably no less illuminating.

The onomatopoeic interpretation of 'twankydillo' is the standard one (Broadwood, Mason et al) and will do as well as any other; provided nobody wants to tangle overmuch with D'Urfey's Roger Twangdillo, of course. I know I don't.

Anybody who thinks that bagpipes don't roar has obviously not been to the same New Year parties as me. When some maniac in a kilt leaps out of the cellar and starts playing them right in your ear, I can assure you that they roar pretty convincingly.

I do take the point, though. To be serious, I'd expect that bit to be the result of textual corruption somewhere along the line. This song, in its various forms, certainly has its fair share of such; and the chances are that whoever wrote it had never even seen bagpipes, whether made of, or played under, willow; green or otherwise.