There was a nice TV program about saloons on the History Channel's
"Modern Marvels" series.  An interesting point was made that the early
saloons were heavily subsidized by the breweries.  This allowed them to
afford the lavish back bars, chandeliers and other accessories.  Pianos
were probably part of this.

As for music, I think jigs, reels and floating folk melodies would be
heard along with some light classics.  I find it funny that whenever
Hollywood did a picture that featured a dance hall scene, the band was
almost always playing "King Chanticleer" -- an 1870s scene with a 1910
song!

As for "Hot Time in the Old Town", I read somewhere (in "They All
Played Ragtime", perhaps) that the tune, along with others like
"Ta-ra-ra-boom-de-ay" and "Frankie and Albert", were featured at Babe
Connors' notorious but very popular spot, "The Castle", in St. Louis.
They supposedly were heard there by visiting song writers who then took
them to Chicago or New York and had them published with their own name
listed as composer.

Todd Robbins

 [ W. C. Handy, "The Father of the Blues", seldom claimed that he
 [ composed the song himself.  He arranged folk blues and street tunes
 [ for the piano, and for bands to play, and then he copyrighted and
 [ published the songs.  If Handy hadn't done the work, some other
 [ publisher would have.  If nobody had published the tunes, we might
 [ not know them today.  -- Robbie