Sounds good, E2S.
Ones ability to sing the heck out of a song increases dramatically once you no longer need the words and chords in front of you.
I think you need to practice tapping your foot while you play. This helps with regard to "getting up to cruising altitude" [so to speak] and staying there.
At this point I would reccomend playing along with your Fave recording of the song and dialing in things like tapping your foot and smoothing out your fingerpicking approach. Maybe work on an alternating Bass line with your thumb.
If you're going to play it in "C", I'm not sure of the need for a Capo... but that's just personal preference. You might kick it around in several other Keys and see if there is a better match for your vocal range.
You might consider going to a guitar pick strumming method... just to hear the juxtoposition of guitar picking vs finger-picking (you can really "put a lil' pepper on it" [as they say], with guitar pick).
In the Vid below you can kinda see Joan Baez doing a similar finderpicking style (watch, Bobby has to tune a little after he puts his Capo on... Capo's often times put the instrument out of tune with itself until corrected, and out of tune with other non-capo'd instruments until corrected)...
Closups of Joan at approx 2:20 and 3:20 show she is wearing a plastic thumb pick and, I think, maybe, not sure, two metal fingerpicks... one each on her index and middle fingers... this is another way that fingerpickers can "'put a lil' pepper on it".
So that is another thing you could try, playing with a thump pick and or fingerpicks.http://www.youtube.com/watch?v=ViBJLUJ4 ... re=related
In this vid (Dark Hollow is the 2nd song) you can see what a pure Bluegrass strum method looks/sounds like.http://www.youtube.com/watch?v=0RkxpFvo__k