In the first episode, just four episodes previously, it is established that the year is 1879. It is mentioned that Jesse's brother Charley died recently in this episode, and in real life Charley died in 1884. It's clear that this episode isn't set five years after the premiere episode.
The song the Guitar Player (Tony Romano) is singing through the episode is based on the popular poem of the time, "The Ballad of Jesse James". through the years, songs based on the poem have been recorded many times, by artists such as, Woody Guthrie, Pete Seeger, and Bruce Springsteen, to name a few.