I think Karen's right: Musgrave is a knight, a member of the gentry, and the same social class as Lord and Lady Barnard, but at a lower position within that class. This is more obvious in some of the verses Nic leaves out, in which Musgrave is described as a knight.

Interestingly, here we have an example where Nic's editorial interventions have caused some ambiguity. It is possible to think that Musgrave is a commoner in this version, and some people do think that, as is obvious from this thread. That is one of the ways in which Nic has affected the meaning of the song. But you can't tell that without doing some comparative analysis.

As for the Folk Process comment, let me explain a bit. I think it's true, as Karen says, that the sum total of all changes made by individual singers is what's important. But in this case, the only individual singer we know of who has made any change is Nic. The versions published in Child, some of them anyway, are printed texts that were over 300 years old when Nic consulted them. There is no evidence that they are the result of a any kind of folk process--just re-printings of a lost original. Given this, Nic has taken a literary work, and selected some verses, left others out, and changed others. I would call Nic's changes a single person's personal preference, rather than a "folk process," which is usually used to mean the sum total of many people's changes.

Because of this, the people above who mention the audience response are also right. What we commonly mean by "the folk process" is some trajectory over time--singers make choices, some are retained by other singers, others are not. If you look at versions of this song obviously influenced by Nic, clearly some of them didn't agree with him on the question of whether Barnard's regret was extraneous. Christy Moore, who uses Nic's tune, returned those verses to the song. So you can use this to look at a certain kind of process, but again, not if you concentrate only on Nic's version.

Finally, most of the time "the folk process" refers to an oral process, rather than sitting down with a bunch of books, or a bunch of texts in one book, and selecting verses from them. That's more of an editorial process. But I grant that there are no hard-and-fast lines between literate and oral versions of this process.

Interesting discussion!