Nah, they couldn't have been high when they wrote this. ;D

The song never specifically mentions drugs or their effects but it bares signs of the language of the drug culture.  Some of the most oft cited lines include "Take me on a trip upon your magic swirlin' ship," and "Then take me disappearin' through the smoke rings of my mind."  Add to that, the song was written during a period when Dylan's writting was evolving rapidly from a straight narrative folk tradition to a rich allusion filled style influenced by Beat writers, particularly Allen Ginsberg.  And consider also that at the time Dylan was known to be dabbling with various narcotic forms, mostly just to keep pace with his exploding career.  It's probable drugs influenced the writting of the song if they aren't the specific subject.  Don't bother asking Dylan, he never ever offers to elluciate on his lyrics, he says that's the listener's domain.  I think he probably doesn't know for sure himself what the lyrics mean.  One of his masterpieces.

I have no idea if this was really about drugs. I never thought of it that way, and it's not a song I'd think about dropping acid to even in the days that I might have experimented accordingly. Again, there's a lot of nonsensical imagery, but that's the case in most of his songs.