Yeah, I think the English regularly made fun of the Scots and the Irish- oft times tongue in cheek as it were so the humor may be very subtle. The date on Walpole's letter to Percy was early February 1965 and the first published ballad of Lord Lovel is credited to Percy (1770). I don't think Percy or the Reverend Parsons who supposedly sent Percy the ballad in May of 1770 had ever heard of Lord Lovel before- and I believe I can make this case because I obtained the original documents from Harvard and the Percy-Parsons connection looks pretty sketchy. My theory is that Percy tried to pass Walpole's burlesque, parody, what have you, with a few minor changes, as a "Northumbrian ballad." Percy was at that time in the employ of a wealthy Northumbrian family. Percy was very ambitious and it was due, in no small part, to his publishing credits that he eventually attained the status of Bishop of Dromore.

About the subtlety of the humor...Review Child 75A, that's the variant credited to Percy, and ask yourself whether you see the same innuendo in the same lines as are found in Walpole's obvious parody:

75 A.2 'That is a long time, Lord Lovill,' said she,
       'To live in fair Scotland;'
       'And so it is, Lady Ouncebell,
       To leave a fair lady alone.'

Sounds to me like these lines are hinting at infidelity. This is not a ballad, it's a rehashed anti-Jacobite tavern song! The true ballad of Lord Lovel, which I believe was inspired by Lord Levett (Nora's version) is the version 75E, contributed by a reknowned and well loved Scottish folklorist John Francis Campbell aka "Young John of Islay."