Well it's just my opinion, but 'ripping off' might be a tad of an overstatement. The early dead was in my mind a Blues/Dance band on a lot of strong acid. And really when it comes to their improvisational material there were only a few different ways to skin a cat. That said, yea the playing and phrasing are very reminiscent of the early GD. Tone wise though again I have to say that there really wasn't too much available in the gear market that would satisfy a gigging professional rock/blues band. Both guys plugged Gibson guitars into Fender Amps and the tone was bound to have some overlap.
That Newport gig is (as I'm sure a bunch of you guys know) pretty infamous. Dylan came out with guys from The Butterfield Blues Band and played electric music for the first time (in public) at the Newport festival. The crowd went berserk and Pete Seeger had to beheld back from taking a hatchet to the speaker cables (he claims the hatchet thing is a myth but like any good story it has some measure of truth to it I'm sure). At any rate Dylan was electric for the first time in public and I bet they where LOUD! just to prove a point. Al Kooper tells the story of the Highway 61 sessions in the PBS Dylan doc which is excellent. Dylan was forging new ground with that Highway 61 matearal but he was also thumbing his nose at the New York, lefty, intellectual, folk scene at that show which I think is pretty great, really the first punk thing ever done in modern music. Maggies farm that night was a giant FU to the folk establishment. That's Peter Yarrow who introduces them and he actually had to come back out after their short set to try to smooth things over with the extremely pissed off crowd. Dylan came back out and played some acoustic numbers but things would never be the same.
Bloomfield played a bunch of gigs for Chet Helms' Family Dog and I believe Bill Grahm in SF. I believe they shared the bill with the GD on a few occasions.
Thanks for posting that clip, it's an interesting subject to chew over.