I searched mudcat and couldn't find a discussion of this song's origin and variants. If you know of variant verses, please post them below along with where & when you learned & sang the song.
The song goes by several titles:
Loddy Lo Hey Liley, Liley Lo Hey Li-Lee, Li-Lee-Lo Hey Li Lee Li Lee Li Hey Liley Liley Lo
[Aside: "It always started 'I know a guy / gal'."]
I know a gal all dressed in black Hey loddy, loddy, low Makes her living living on her back Hey loddy, loddy, low
Chorus
I know a gal all dressed in green Hey loddy, loddy, low Walking talking sex machine Hey loddy, loddy, low
c1965. Transcribed from the singing of Sarah Curry who was at the University of Arizona. She goes on to say that many verses were impromptu but generally the verses were about sex in one way or another.