My take on the song is the same as Little Hawk's - it's about innocence, and that's why it's a kid's song, and it's about the corruption of innocence. An effect that is achieved remarkably economically. And it also works just as a fun songs for kids, which is how it should be.
Typical of Dylan to be working at different levels in the same song. If he sang "Old MacDonald had a Farm", what'sthe betting he'd have a hint about the existance of slaughter houses neatly dropped into it somewhere...
Actually, I wonder if Dylan has ever thought of putting together a children's record, like Woody Guthrie and Leadbelly did.
Both musically and in terms of the use of language Slow Train is one of my favourite Dylan records. I'm inclined to give up on people who turn away from it and run it down, just because they aren't at ease with the way he was thinking about life at the time he made it.