Character mistake: When Mrs. Bun asks the dining lady if she has anything without spam in it, she forgot about egg & bacon, and egg, sausage & bacon. Those had no spam in them.
Character mistake: When Mrs. Bun asks the dining lady if she has anything without spam in it, she recommends "spam, egg, sausage and spam". This was not in the menu that the dining lady read aloud at the start of the sketch.
Character mistake: During the "Communist Quiz", Eric Idle fails to mention that "the Hammers" is the nickname of West Ham United.
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?