Intrigued by Banjer's comments, which seemed reasonable, I found this site, which seems to explain the context of the song pretty well. It draws on quotes from the members of The Band, and seems authoritative. It makes clear that the reference is to General Lee, not to the boat, including this comment: the fact that Robert E Lee was never in Tennessee after the war doesn't mean that people didn't think they saw him. Likewise, the winter mentioned is shown to be that of 1864-65, not 65-66.

This site has the type of background info that can really flesh out certain songs for me. I hope those interested enjoy it. NOTE: it has a link to lyrics with chords, which I would assume are the "official" ones.