The word silly has changed over the years, see below. It originally meant "happy," or "blessed," and that is the sense that these two Englishwomen are playing off, for those who might notice. Blessed Sisters, and the songs preserved from that era are often Christian. Maddy is clearly some kind of believer, June Tabor clearly not (which is why she doesn't show up in any of the videos here). Most of the others who have sung with Prior over the years don't give much evidence of Christian belief either, but she apparently can enforce her will often enough that they do marvelous versions of hymns and carols. The harmonies are quite intentionally of the raucous, barroom sort, though they do them well enough that one could only wish that an 18th C pub ever sounded so good.
I'm going off script for my Christmas carols here, because these are clearly performance. Yet they still capture much of what I hoped for singing along, especially if you love harmony.
Silly: Cognate with German selig, meaning happy, and goes back to Proto-Indo-European, of course, or I wouldn't mention it. Related to hilarious in that way.
O.E. gesælig "happy" (related to sæl "happiness"), from W.Gmc. *sæligas (cf. O.N. sæll "happy," Goth. sels "good, kindhearted," O.S. salig, M.Du. salich, O.H.G. salig, Ger. selig "blessed, happy, blissful"), from PIE base *sel- "happy" (cf. Gk. hilaros "gay, cheerful," L. solari "to comfort," salvus "whole, safe"). The word's considerable sense development moved from "blessed" to "pious," to "innocent" (c.1200), to "harmless," to "pitiable" (late 13c.), to "weak" (c.1300), to "feeble in mind, lacking in reason, foolish" (1570s).Shakespeare's sense in "Two Gentleman of Verona" is somewhere between the the innocent and foolish meanings, I think. Do no outrages On silly women or poor passengers.
*They tried their hand at more modern songs - just to prove they could do it, I think - such as Rag Doll" and "Black Freighter."