Indeed, all indications are that from a musical and dramatic standpoint, Fyldeplayer's original song is clearly a good song; its listeners have enjoyed it, and other performers have liked it well enough to want to sing it and thereby circulate it more widely.
It seems to me that this last point has been passed over a bit too lightly in the ongoing discussion, as it says a couple of things that are important in context: first, that Fyldeplayer and his works are respected by his local peers and audiences, and second, that most or all of his musical peers understood the local history from which the song was derived in the same way that Fyldeplayer did.
I don't think there's enough available data for us to second-guess the specific historical issues associated with Fyldeplayer's lyrics. That said, the bits of detail we've been given strongly suggest to me that any outright historical errors (if present) are matters of narrow detail, not mis-representation. I do find myself wondering whether part of the problem involves an outright error on the blue historical plaque mentioned above; if that's the case, then I submit that correcting the plaque is of equal or greater importance than correcting the song (and it sounds as if Fyldeplayer has that set of questions more or less well in hand).
Overall, though, I am of the general mind that the song -- having been recognized as a good song by its audience -- deserves to survive, even if a bit of introductory commentary in a performance (or a paragraph in an album's liner notes) is necessary to better place it in full historical context.