Switching from first to third person in a song may sometimes be a result of two versions being put together. But it's a very effective trick, and you get it in lots of modern songs as well (Dylan for example). And in putting the two versions together the old singers knew a thing or two about how to tell a story.

I find I do it instinctively sometimes when I'm singing a song I've written, or one I've learnt. It's analogous to the way the camera point of view in a film will change - for example in a scene between two people.

Mess around with "correcting" that kind of thing too much, and you can change the whole balance of a song. For better or for worse. That's the folk process, and it never stops.