First, the obvious:
And the not-so-obvious.
If you missed the Vietnam connect you're not alone. As one of Mr. John's collaborators said in an interview:
"Daniel had been the most misinterpreted song that we'd ever written" explained Bernie in the "Two Rooms" tribute project. "The story was about a guy that went back to a small town in Texas, returning from the Vietnam war. They'd launded him when he came home and treated him like a hero. But he just wanted to go home, go back to the farm, and try to get back to the life that he'd led before. I just embellished that and like everything I write, I probably ended up being very esoteric, but it is a song that is important to me, because it was the one thing I said about the Vietnam War. I wanted to write something that was sympathetic to the people that came home".
The last verse, which makes all this clear, was cut for length.