I'm surprised that the information in this thread is so incomplete atp, as I once heard on CBC radio a fairly comprehensive exposition. The few details I remember are: that Flipper Smith and Caroline were two well-known local characters; that one or the other of them was feeble-minded; and that the "old working pants" were borrowed from an undertaker.
GEST's site contains a little more information, most of it derived from a dictionary of Newfoundland English, possibly the same source cited above by CarolC.
Johnny Burke makes another reference to crackies in a culinary context in his version of the song which he calls "Trinity Cake", which confection is said to contain "whiskers of crackies".