There are no notes about where Tom Paley got his version, but it is Tom Paley's that Bob Dylan uses for his recording of the song, on World Gone Wrong.

The text is correct, I've checked again.

I thank you for your comments. I'd rather intend the first verse as a menace and the second as an offer. I find amusing the play between the grains a bird eats and the grains of a necklace the parrot will have to eat one by one if he doesn't submit to the murderer's orders to hush up. If the text permits this interpretation, I'd stick to that. Although I agree that the many versions of the song from which this verse come would probably intend the beads as an offer as the other about the cage decked with gold.

Hush up, hush up, my parrot – she cried
Don't tell no news on me
Or these costly beads around my neck
I'll apply them all to thee

Fly down, fly down, pretty parrot – she cried
And light on my right knee
The doors of your cage shall be decked with gold
And hung on a willow tree