I should have checked the OED3; it has significantly expanded its treatement.  They seem much more certain now, citing three distinct origins, then following that up with significant discussion in their finest print, and then their four distinct senses.  Skip the fine print the first time you read this.

> Etymology:  < **-o**, of various origins: 

> * (i) as the final syllable of words of chiefly Romance origin; 
* (ii) as the vowel that became final after the shortening of a word by dropping the syllables following a medial o, especially in compounds truncated after a prefix or combining form ending in -o  ; and 
* (iii) < **ho** int.1, **O** *int*., and **oh** *int*., occurring as a second element in various exclamatory phrases. The suffix is attached both to full words and to truncated forms of words and phrases.

> <sup><sub>Borrowing of words ending in **-o**   from Italian, Portuguese, and Spanish, with retention of the final vowel, began in the early 16th cent. (e.g. *Morisco* adj., *frizado* n.). Previously, such forms had usually been assimilated to native phonological structure by the removal of the final vowel. Since unstressed final long vowels had not hitherto been part of English phonology, there was a tendency for the vowels *o*   and *a*   in this position to be confused; in spelling, final *o*   frequently replaced *a*   and other syllables (e.g. in *camisado* n.   (Spanish *camisada*), *calico* n.   (compare the place name *Calicut*), both from before 1550), and this tendency to substitute o   continued into the 17th cent. and later (compare *mango* n.1   (Portuguese *manga*  ), *lingo* n.1   (Portuguese *lingua*)); there are also English formations which appear to have been made in imitation of Romance loanwords (e.g. *stingo* n.   and perhaps the nonce-word *twango* int.). By the late 17th cent., final **-o**   seems to have become assimilated into English phonology and appears in new words of undetermined origin, e.g. *bingo* n.1, *rhino* n.1 </sub></sup>
 
> <sup><sub>The shortening of a word immediately after a medial **o**, and in particular where this occurs at the end of a prefix or combining form, first appears in the late 17th cent. and early 18th centuries, e.g. *plenipo* n., *memo* n., and *hypo* n.1   This probably established an association of the ending **-o**   with casual or light-hearted use which it has retained ever since. Further examples are attested in the early 19th cent., e.g. (combining forms) *Anglo* n.1, *mezzo* n.1, *typo* n.; (other words) *compo* n.2, *loco* n.1   After 1851 this type of clipping becomes, and has remained, extremely common. Truncation after a written **o**   not pronounced as such may be the explanation of **tambo** n.1   (mid 19th cent.), which, if not the first example of the use of the suffix **-o**, seems to anticipate its later pattern of use with truncated word-forms.</sub></sup>
 
> <sup><sub>The attachment of *ho* int.1, *O* int., and *oh* int.   to other words to form conventional cries and refrains is attested from late Middle English, e.g. in *heave ho* int. and n., *hey-ho* int.; *alive ho!*   is attested from the early 18th cent. or earlier (see *(all) alive, (alive), oh!* at **alive** adj. Phrases 2); and expressions such as *righto* int. and n., *billy-o* n., and *cheerio* int.   are attested from the later 19th and early 20th cent. A number of words occur in the second half of the 19th cent. which appear to have their origin in the attachment of one of these interjections to a noun or adjective to form a refrain-like or vocative expression (such as a form of address or a public announcement) which was subsequently used as an ordinary noun or adjective (compare *spell oh!* (or *ho!*) at **spell** n.3 3c). Some of these are normally or frequently written as hyphenated compounds of *-ho  , -O*   or *-oh*, e.g. *smoke-ho* n., *dead-oh* adj.   (late 19th cent.), *bottle-o(h* n., *rabbit-o* n. and int.   (early 20th cent.), *daddy-o* n.   (mid 20th cent.), while others (see below) are treated in spelling as having the suffix **-o**; their classification as cases or non-cases of the present suffix is rather arbitrary. The earliest example which shows a clear transition from one use to the other is *milko* int. and n.; other examples of the use of the suffix in similar formations are *kiddo* n.   and *Relievo* n.2   (a game named after the cry used in it) (late 19th cent.), *whizzo* int. and adj., and *socko* int., adj., and n.   (first half of 20th cent.).</sub></sup>
 
> <sup><sub>From the early 20th cent. the addition of the suffix to complete words to form nouns, adjectives, and interjections of all kinds becomes very common, e.g. *wino* n.1, *whacko* int., and *cheapo* adj.   The earliest example of the addition of the suffix to a truncated word is probably *beano* n.   (second half of 19th cent.), followed by *Salvo* n.3, an Australian formation; another (uncertain) example from the same time and place is *robbo* n.   Since the beginning of the 20th cent. formations of this kind have become numerous, e.g. *ammo* n., *arvo* n.   (one of several later Australian formations), and *wacko* adj.  </sub></sup>
 
> <sup><sub>The suffix is not infrequently used to create product names, among the 
earliest  being *blanco* n.   and *Oxo* n.   in the late 19th cent.</sub></sup>


> Forming slang and colloquial nouns, adjectives, and interjections. <sup><sub>The use of the suffix is widespread in English-speaking countries and is especially associated with Australia.</sub></sup>
 
> 1. Forming interjections, as ***whacko*** int., ***whammo*** int.
  
> 2. Forming familiar, informal equivalents of nouns and adjectives, as (from truncated word-forms) ***aggro*** n. and adj., ***combo*** n., ***metho*** n.1; (from complete words) ***bucko*** n., ***kiddo*** n.; ***cheapo*** adj., ***neato*** adj. 
 
> 3. Forming personal nouns from non-personal nouns, as ***milko*** n., ***wino*** n.1
  
> 4. Forming nouns from adjectives, as ***pinko*** n., ***weirdo*** n.  
 
It’s not surprising you heard it in songs; I think it happens there a lot. Consider the words the children’s song [*The Farmer in the Dell*](http://en.wikipedia.org/wiki/The_Farmer_in_the_Dell):

>           *The farmer in the dell  
          The farmer in the dell  
          Heigh-ho, the **derry-o**  
          The farmer in the dell*.


This kind of thing is used a great deal by the “nonsense” of Tolkien’s [Tom Bombadil](http://en.wikipedia.org/wiki/Tom_Bombadil) character when he sings — which he pretty much does always, even when it’s written as prose.

Here is a bit from when he rescues the Hobbits from Old Man Willow:

> He turned round and listened, and soon there could be no doubt: someone was
singing a song; a deep glad voice was singing carelessly and happily, but
it was singing nonsense:

>           *Hey dol! merry dol! ring a dong <b>dillo</b>!* <br>
          *Ring a dong! hop along! fal lal the willow!* <br>
          *Tom Bom, jolly Tom, Tom <b>Bombadillo</b>!*<br>

> Half hopeful and half afraid of some new danger, Frodo and Sam now both 
stood still. Suddenly out of a long string of nonsense-words (or so they
seemed) the voice rose up loud and clear and burst into this song:

>           *Hey! Come merry dot! derry dol! My darling! <br>
          Light goes the weather-wind and the feathered starling. <br>
          Down along under Hill, shining in the sunlight, <br>
          Waiting on the doorstep for the cold starlight, <br>
          There my pretty lady is. River-woman’s daughter, <br>
          Slender as the willow-wand, clearer than the water. <br>
          Old Tom Bombadil water-lilies bringing <br>
          Comes hopping home again. Can you hear him singing? <br>
          Hey! Come merry dol! deny dol! and **merry-o**, <br>
          Goldberry, Goldberry, merry yellow **berry-o**! <br>
          Poor old Willow-man, you tuck your roots away! <br>
          Tom’s in a hurry now. Evening will follow day. <br>
          Tom’s going home again water-lilies bringing. <br>
          Hey! Come derry dol! Can you hear me singing?*<br>

I imagine uncountably many similar examples could be pulled from literature and nursery rhymes alike.