This is all interesting. I don't have much to say to the original question, except that I am as certain as it is possible to be about these things that Westall's verses were made up by him or someone else who wished to connect this song to witchcraft, and do not represent any historical connection with witchcraft.

Paul and Steve, as you both no doubt know, there are many possible "solutions" to the symbolism in such songs. In the related "Riddle Song" or "Captain Wedderburn's Courtship," the "cloth with no needlework, weaving, etc" appears to be (not to be indelicate), a woman's pubic hair, just as the "winter fruit that in December grew" is the male member. Thus "my father had some winter fruit that in December grew, my mother had a mantle, that warp nor weft went through...."

In that song, as Steve G points out, the symbolism is not so hidden; many members of the traditional community singing the song would understand it. Barre Toelken's essay on this showed that in North Carolina, many of the riddles in the "riddle song" existed in oral tradition separately from the song, and many adults knew them ("Q: What is deeper than the sea? A: Vagina--it can't be fathomed!")

In Toelken's words:

In A, verse 12, the lady asks for "winter fruit that in December grew," and for "a silk mantil that waft gaed never through." Both of these, phrased as conundrums and with certain simple but vivid differences in terminology, were current among rural men in Buncombe County, North Carolina, in the summer of 1953, and there seems to be no reason to believe they are anything but traditional. Their proper answers were, respectively, "penis" or "baby," and "pubic hair." The "Cambric Shirt" can thus be seen in the same way; his asking the girl to present him with a garment that is not stitched or hemmed can be seen as a request to "show me yours." But, as Paul says, it also has overtones of the shroud, and Toelken found those similarities to be present in oral tradition too.

In general, how "Magickal" The Elfin Knight is is hard to say. On the one hand, it clearly contains magic in its very conception; a visitor from elfland. On the other hand, the specific tasks (acre of land between water and strand, shirt without sewing, sow a field with one peppercorn, etc) are the typical kinds of impossible tasks found in folktales. In the folktale context, the specific tasks don't seem to be THAT important symbolically, so that different versions of the same tale will often have quite different tasks. The important thing is that they are impossible and can only be solved either with magical help (which is then provided), or by extraordinary effort and cleverness (which the hero demonstrates).

In most versions of "The Elfin Knight," the girl simply sets equally impossible tasks in return, a plot that exists in folktales as well. That way, no-one actually has to perform any tasks at all!

In this particular story, since what seems to be at stake is the girl's maidenhead (mentioned at the end of the oldest versions), I would think a sexual connotation more likely than a connotation of death--however, given the similarities between "faerie" and "limbo/purgatory" that we see in such stories as "Tam Lin," the death idea could be present as well. Toelken's take is that many of the riddles are ambiguous in exactly this way, and can be interpreted as about either sex or death. He states that ambiguity is the most essential characteristic of many versions of this ballad, and points to one Ozark version as an example, a version that ends (as many traditional versions do) with the girl posing her own tasks and then saying "if you do all that, then you can have your Cambric shirt." In Toelken's words:

instead of carrying the story out to a stated conclusion, "The Cambric Shirt" focuses the listener's concentration on the ambiguities themselves in such a way that he hears the girl say no, but realizes that she means yes. He sees that if the young man succeeds in doing properly the tasks she outlines for him, he will have had his "Cambric Shirt" in the process.

This essay, by the way, was published in the journal Western Folklore in 1966, then revised almost thirty years later as a chapter in Toelken's book Morning Dew and Roses. It's an outstanding contribution to the literature on this ballad, from an outstanding scholar.