"I think it referred to the people who sold sheets of song words"
Exactly - here in Ireland, the term 'ballad' is still used for the song sheets sold around fairs and markets right up to the mid-fifties, usually by Travellers - we never met a traditional singer here who hadn't learned songs from them.
Bert Lloyd once claimed that at one stage in history those caught selling ballad were arrested and had a hole burned through the flesh of their ear for a first offence.
The White Hart Irish music pub in Fulham - now sadly 'modernised' used to have a notice on the wall threatening prosecution to "Rogues, thieves, pickpockets and ballad sellers".
Jim