Based on the Hully Gully line dance. The Wooly Bully song by Sam the Sham and the Pharaohs was based on Hully Gully by Big Bo and Little Smitty in 1962 but the Hully Gully dance is older than that
I don't know if this has been mentioned in any of the links posted - I haven't been through them all - but there was a song called 'The Hully Gully' recorded in 1959 and that's what sparked the dance craze.
John O'Hara's band were from Glasgow, but were more successful in Germany than they ever were in the UK - although they did get quite a bit of domestic televisual coverage in the late sixties. Although John wrote some original material, most of their recorded output was songs written for other bands - I hesitate to call them "covers" because most were re-arranged to suit the band's generally unique style.
I came across this earlier...the Olympics. I certainly remember hearing it. On another link it's mentioned that the dance itself may have dated back to Black "juke joints" 40 years earlier.