Hi, DADgbe...

There's an interesting note in the Digital Tradition version called P)retty Peg:

Hope you or someone else can fill in the asterisks; look for a similar but more detailed Scottish version called "The Blue Blanket" which describes the lovely young daughter hiding her boyfriend in a blue blanket while Daddy comes up to check on her, and the boyfriend's brother/accomplice
waits on the roof for a tug on the rope to pull him back up. When Momma falls into the basket, of course the accomplice starts hauling, Momma starts screeching that the Devil has her and a fun time is had by all!"

That version came from a post (click) from the wonderful and wise Mary LaMarca, who died a few years ago. So, I'mn gathering that the "blue" verse is a remnant from the earlier "Blue Blanket" version, in which the blue blanket may have played a more significant part.

The "blue" verse isn't unusual - it's in both Child 281a and 281b. Neither has been posted at Mudcat or in the Digital Tradition, but you can find them here (click).

-Joe-