It's filmed in and around Holmfirth in West Yorkshire. I was out on a day of dance there a few years ago and saw some of the filming down by "Nora Batty's cottage". (They have the most gorgeous sound engineer! We ended up sharing some of our lunch with him).
The tune, played by Larry Adler, was specially commissioned for the series, I believe. It's been running for about 25 years now! Sadly, of course, Bill Owen has died, but the series still continues. His son is now playing his son in it!
Andrea