I've heard it was a tape speed thing. The notes are Jerry, to me at least - just a lot faster. Les Paul used that trick on the first multi-track recording of Caravan. Played at half time and sped it up to get a piccolo guitar sound.
Terrapin Flyer was arranged completely different originally, Mickey had composed an entire percussion piece for it. Ken Olsen erase d all the tapes with Mickey's parts and substituted the orchestral stuff in it's place. Upon here the end result, Mickey went apeshit and chased Olsen around the studio control room intent upon killing him.
Yes, Jerry's guitar parts were sped up on tape to get the effect you hear in the released version... They were too far into the session and behind on the release so it went out as is.