Nice melody and well played. Seems to me that the guitar is playing the melodic line that's more fitting for a vocalist. A guitar playing just the individual notes needs some backing elements, like a strumming pattern with varying chords or a bass line or something.
I do like the idea of taking an old folk song and getting creative with it. I'd try expanding on the basic melody a bit and make a complete song out of it - intro, verses, chorus etc.