"Ye" and "you" were not mere variants. In Bible English, "ye" was nominative, and "you" objective. In "God rest you merry, gentlemen", "you" is the object of the verb "rest", "merry" is a predicated adjective, and "gentlemen" is a vocative (noun in direct address). Spelled out, the meaning is "May God keep you merry, O gentlemen!". A good example of the contrast between "ye" and "you" is the line from the Battle Hymn of the Republic: "As ye deal with My contemners, so with you My grace shall deal". Howe knew her KJV.
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