There's a common assumption that a "rag" is a tune with a ragged rhythm - a perfectly logical assumption. However, there's also a theory that "ragtime" (from which "rag" derives) refers, not to the rhythm of the tune but the fact that it was used as dance music. The dancers would get dressed up in their best clothes - their "rags" for the function. There's the related phrase "glad rags" - meaning your best clothes.

There was an interesting interview with Jean Ritchie on the recent Folk America series on UK TV, where Jean was describing the New Yorkers going to square dances dressed in blue jeans, checked shirts, etc. - thinking it be authentic to dress that way. The reality being that true country people used such an occasion to get dressed up to the nines - in their "glad rags" (though Jean never used that particular phrase).

Just an alternative thought...