I think you just hit it upon the head by citing "Now poets sing how Pancho fell"...this is a perhaps a song best commenting on sung and unsung heroes. The bandit gets glorified by poets, while the drifter dreamer (the poet...perhaps, Townes himself) only gets the glorified bandit who bit the dust's dust in his mouth...ie. the unglorified life that Townes likely felt he lived as a singer-songwriter.   

QM