I have just realized that although I have seen the word 'withal' many times over the years, that I did not know its actual meaning. So I looked it up.

'Withal' simply means 'with', but it always comes after the object noun. They gave a phrase from Job as an example:

a potsherd to scrape himself withal

This means the same as 'a potsherd to scrape himself with.'

Now, I can say, "I can only scrape myself clean with a potsherd," but I can't say "I can only scrape myself clean withal a potsherd."

So the first verse was right the first time. The last line should say

I will sing and make merry with all (i.e., with all of us here)

Because if it were 'withal', we would have to ask - wherewith withal?