The title doesn't refer to what you may be thinking, at least not directly. This tune didn't get its title in the same way that the Irish polka 'Maggie In The Wood' seems to have done ...
If I had Maggie in the wood,
I'd do her all the good I could!
Sally In The Woods is actually a stretch of road between Bath and Bradford-On-Avon, which I used to drive regularly on the way to see a beautiful girl (who wasn't called Sally).