Trivia: The German joke versions are spoken in an intelligible, pseudo-German gibberish (perhaps fortunate, if the joke would really work). I happen to live in Germany, and even with close scrutinizing I haven't been able to filter a meaning out of this.
Trivia: The approximate wording of the German Hitler rally fragments used for the 'Pre-War Joke' is as follows: Hilter: Particularly, since none will evermore be living in Germany. Nazi: We are the young fellowship of the Reich! Hitler: Your education.
Chosen answer: The song you talk of was originally a poem by William Blake called 'Jerusalem'. It speaks of the possibility of Jesus having visited England. The poem has four verses but you only ever hear the Monty Python boys sing the first one which goes, "And did those feet in ancient time/Walk upon England's mountains green/And was the holy Lamb of God/On England's pleasant pastures seen?" If there's any sort of in-joke connected to it's use, I'm not aware of it. It seemed to just be the standard song/hymn they used when a song was needed that wasn't sketch specific. Some of the sketches it appeared in were 'Salvation Fuzz/Church Police', 'Buying a Bed' and 'The Art Gallery Sketch'. Something that may be relevant, though, is that the only one who was present every time it was sung was Eric Idle. Perhaps he just liked it?