it's a matter of what "sounds" right

That's the bottom line (especially on sitting/setting ).

Of course "lie" also has a double meaning which - especially in a song - may cause confusion and/or mondegreenery.

and:

Lay lady, lay = lay [yourself down] lady, lay [yourself down]

Lay down, Sally = Lay [yourself] down, Sally
Rest you in my arms = rest you[rself] in my arms
..blah blah