The version that I learned as a child (Arizona in the 1980s) were:

Down by banks of the hanky panky
where the bullfrog jumps from bank to banky
With a hip, hip, hip, hop
He jumps from a lilypad --
KERPLOP

This was sung, so it was likely taught to us by adults at summer camp.

My friends and I also had variants of the other rhymes, but they were separate:

Coca-cola went to town
Pepsi Cola shot him down
Doctor Pepper fixed him up
And now we're drinking Seven-up
(sung to the tune of Yankee Doodle)

and the rhyme in question:
I pledge allegiance to the flag, Michael Jackson is a fag.

That was 1985 give or take a year. The version I knew from childhood did not include the line about little toys or little boys. I believe this predates the sex scandals. Rather, the faggotry in question was his wearing a white glove, prancing on stage, and grabbing his crotch. I distinctly recall that none of my friends knew what a fag was, but Michal Jackson grabbing his crotch was a sources of considerable discussion.