Can’t find anything online about this phrase.
Why were his eyes cotton?
Are there any negative or racist connotations to the phrase?
I searched “History of folk song Cotton Eye Joe” and got these. Lyrics. Discussion of meaning. (Scroll down a good ways to read the discussion.) One of the theories is that it means “blue eyed”. Another theory is that it’s origin is racist. This is a fun folk dance to do, I love to dance this dance. 
Can’t answer your question directly, but here’s a discussion I found online:
Hehe, you got the same discussion I did on your search xash. 
Hmm, interesting.
I eventually managed to find something else that contradicts the discussion on your cites:
Sounds like maybe they’re trying to tone down the slavery (?) implications of the lyrics:
What, no one else thought to ask where did he come from or where did he go?
For that matter, why the heck do they play it at baseball games?
I’ve wondered that too. I know they have been playing it at Yankee Stadium after the seventh inning stretch for some years. Is this a widespread thing?
Oooh! I hate that song!!
Now I’m gonna have it stuck in my head for at least all day (and knowing my accursed brain, probably longer).
Dammit jjim!
Who will finish that last line for me?
I went to an Isotopes game a couple nights ago and they played it sometime during the game. I don’t think it was after the seventh inning stretch, as I believed they nearly went right into YMCA.
“I’m a doctor, not a Disk Jockey…”
Is this the song/dance where the dancers respond “Bullsh*t!” to the caller?
I’d heard that “Cotton-Eyed Joe” was an old black man with a shock of white hair and bushy white eyebrows.
And somehow I’ve managed to miss 499 of them. Fine with me.
Here’s a pop/dance music version. Enjoy! 
(Actually the fiddling on the 2 songs this band performs is good, though I could do without the visuals.) You’ll have to be logged in to your Launch/Yahoo account to see the video. If you have a Yahoo e-mail account, then you already have a Launch account waiting for you. Just sign in using your Yahoo ID and password.
I believe that’s “Charlie on the M.T.A.”.
Isotopes? Is there a Springfield in Central Pa. that I don’t remember?
I’m pretty sure that that was the one version drewbert has heard. It was, by a country mile, the most popular version of at least the last 20 years or so.
I wondered that too. Is there really a team called the Isotopes? Do they have the same mascot, etc?
Regarding the OP: When I was in high school we used to use the term quite a bit. When you smoke pot your mouth dries out and you get “cotton mouth”. Your eyes also turn red, which we assumed was from being dried out too, hence “cotton eye” :).
The Albequerque Isotopes are named after the Simpson’s episode where the Springfield Isotopes threatened to move to Albequerque. I’m pretty sure the people of Albequerque actually voted on this as the name they wanted for their minor league team. Which officially makes Albequerque the coolest place ever.