Actually Dougie wrote this song in Brittany,
He told me this once in Ullapool.
Atfer he left the "tannies" (Tannahill Weavers) he was busking and giging with two Irish boys ( Desi something - the might have gone on to form Cran)
Anyway, Dougie said that after doing a bit of busking in Rennes, the boys bought a carry out and headed north for the coast. Des was emotional with the drink and was looking out to sea and kept on saying " Ireland's over there!"
Dougie thought of a wee country just east of Ireland and went away into a corner and wrote Caledonia.
That's how I was told it anyway.