Often used in AWADtalk, but I don't remember seeing its etymology. From Brewer:
Silly is the German selig (blessed), whence the infant Jesus is termed “the harmless silly babe,” and
sheep are called “silly,” meaning harmless or innocent. As the “holy” are easily taken in by wordly
ounning, the word came to signify “gullible,” “foolish,” (See Simplicity .)