There are several versions to this and uncertain historical facts about the song. From memory in Scotland the kids that I played with said Illey/ Elley Alley O not Alley Alley O. But that could have been because they picked it up wrong.
We also sang November not September in Scotland. So many variations of the song make it difficult to trace the true facts of its origins.
Also due to accent differences between regions and between Scotland and England that could be another factor in the change of words. A and E are definitely sounded differently in Scotland, much the same as in New Zealand, they pronounce A, as an E and vice versa, they pronounce the letter I like a U also. The Scottish don't but the sound of A and E is more pronounced with a heavy Scottish accent.
Historical meanings for this song seem to vary according to some researchers. Some say the song is about a shipping canal in Manchester in the north of England. Others say the song is about the Suez canal opening back in November 1869. I would lean towards the Suez Canal.
There is also an Irish tale of origin too, which someone has commented on in the comments section from the Guardian, that relates to Irish navigation workers involved in the dock yards, and they sang the Illey Alley O in Ireland too, so it gets very complicated as to what is the true origin of the song.
https://www.theguardian.com/notesandqueries/query/0,5753,-18017,00.html
Interesting article and comments here.
This song or rhyme was always one of my favourite as a small child. As we get older and reflect on childhood it is amazing what comes back to the front of our minds. Little moments of joy from life's scrapbook.