" Some of the ballad makers were quite simple people who didn't necessarily put in a great deal of thought or sense, and often were just imitating a simple idea from elsewhere, classical mythology, folk-tale etc."
Which they got from were exactly Richard - the local lending library perhaps?
We recorded an hour-long folk-tale from an 80 year old local man here once, who said he had learned it from his grandfather when he was very young, placing its entry into the family at some time at the end of the 18th century, possibly earlier.
At that time, there would have been no access classical mythology or written folk tales in rural Ireland - it was a time when this part of the country would have been struggling with literacy, never mind having access to literature in any form - they would almost certainly have been mainly Irish speakers with only a rudimentary grasp of English.
I very much doubt if the urban lower classes were in a different situation as far as this kind of literature is concerned.
The tale we recorded was published, I believe for the first time, in Joyce's 'Old Celtic Romances', in 1894, totally different in all respects to the way we were given it other than the basic story-line - we gave a copy to the storyteller to get his opinion, which was, "I don't know where he got it but he has it all wrong".
The problem with discussing these subjects is we know virtually nothing of the singers and storytellers beyond their being repositories of song and stories - nobody has ever bothered to ask them.
Classical writers borrowed freely from folklore and oral literature of their time - there are several books, at least one sizeable one, on the folklore of Shakespeare.
A significant number of the big narrative ballads, came from totally illiterate Irish Travellers - look out for Martin MacDonagh's 'Lady Margaret' if you haven't heard it, a spectacular six minute rendition of Young Hunting from a man who couldn't read a street sign and who chopped and sold firewood for a living, among a dozen other basic jobs.
John Reilly, another illiterate Traveller, sang Lord Bateman, Lord Gregory and The Maid and the Palmer and a dozen other big ballads and songs - he squatted in derelict houses and died of malnutrition and neglect.
He couldn't read a word and neither could his parents, and they lived lives that gave them no access whatever to literacy.
Ballads like Lamkin, Willie of Winsbury and Fair Margaret and Sweet William (Chid 74) owe their survival, fully or in part, to non-literate Travellers.   
In the late 1970s we recorded an old West of Ireland man who had worked for McAlpines as a building worker; he sang us over 70 songs which he had learned back home in Ireland, which he had left in the mid-1940s.
His family came from an island just off the coast here which had been evacuated some time in the 1920s - he told us that when he was growing up his parents were native Irish speakers with little English though he had no Irish whatever.
In the pub after our recording sessions he used to tell us 'yarns', basically jokes with no punch lines, in fact, short folk tales.
One night he told us one entitled 'The Sea Captain and the Fiddler', about a bet between two man over whether the wife of one of them would remain faithful.
It has two recited verses:

Fiddler:
Hold tight my love, hold tight my love
For the space of half an hour,
Hold tight my love, hold tight my love,
And the ship and cargo will be ours.

Wife:
You're late my love, you're late my love,
He has me by the middle.
I'm on my back, we're having a crack,
And you have lost your fiddle.

I very much doubt if Mikey kept an edition of Durfey's 'Pills to Purge Melancholy' (1719) at his bedside, which is the only source I have ever been able to trace this story - as a full song with similar verses to Mikey's.
One of the most arrogant statements I have ever read concerning folk songs and their singers came from Phillips Barry, an eminent ballad scholar who really should have known better.

"Popular tradition, however, does not mean popular origin. In the case of our ballad, the underlying folklore is Irish de facto, but not de-jure: the ballad is of Oriental and literary origin, and has sunk to the level of the folk which has the keeping of folklore. To put it in a single phrase, memory not invention is the function of the folk".

It displays an ignorance of traditional singing which I would have hoped we've grown out of - apparently not.
Jim Carroll