I have this book and CD set, where Peter Yarrow says "IT IS NOT A DRUG SONG) and the ending has a little girl named Jackie meeting up with Puff.
My son had that set when he was little.
Thing is, “Puff” is not a tragic song- it’s a bit wistful, but it’s not as if something terrible has happened.
Little kids have favorite toys and imaginary playmates. When they grow up, they generally give those things up- and they SHOULD! If 4 year old Jackie Paper carries a stuffed dragon with him everywhere he goes, and sleeps with it at night, that’s adorable. If 14 year old Jackie still sleeps with it… not quite as cute. Maybe a little creepy.
Now, as the Dad of a 12 year old boy, I’ve gotten to see the “Puff” story play out in real life many times. I sometimes come across an old toy or stuffed animal my son used to play with, and get a little misty-eyed, remembering how I used to work that toy into my son’s bedtime stories. But my son wasn’t SUPPOSED to stay little forever. He’s SUPPOSED to be the roller blader and budding ladies man he is now.
In a way, “Puff” was a precursor to Toy Story. It treats imaginary playmates as real characters with real feelings.
In the Snopes article, Peter asked “What kind of meanspirited SOB would put drug reference is a children’s song?”
Well, expanding that to children’s entertainment in general, Sid & Marty Krofft?
H.R. Pufnstuf… Lidsville….
The Altered State of Druggachusettes… 
As to the OP, here are two possibilities tho I don’t know if either were what the OP heard…
https://www.youtube.com/watch?v=NeuXmMw3w1MA. A. Milne did it before all of them.
And Margery Williams did it before A. A. Milne. No doubt even earlier examples could be found.