Robomatic,
Regarding whether or not the song is based on a historical event, in the early 20th century professors Guy B. Johnson and Louis Chappell both separately went in search of the historical John Henry and tried to determine whether the race with the steam drill actually happened. Based upon a local story tradition of the race having taken place near Talcott West Virginia in the Big Bend (aka Great Bend) Tunnel, they concentrated their efforts in that area. They both failed to come up with proof that the event actually happened and they failed to identify the historical John Henry. Still, there are books and articles which present as fact that John Henry raced a steam drill in the Big Bend Tunnel.   

Another researcher named Scott Reynolds Nelson published a book titled Steel Drivin' Man about 10 years ago in which he claimed that the historical John Henry was a convict lease worker named John William Henry and that he raced a steam drill in the Lewis Tunnel in the state of Virginia. A competing claim has been made by folklorist John Garst who believes that the real John Henry raced a steam drill in the Coosa Mountain Tunnel near Leeds, Alabama. About 3 or 4 years ago, I heard that Garst had completed writing a book detailing his research, but based upon my periodic searches in Amazon.com it appears to not have been published yet.