Perhaps you know the legend of Bonnie Prince Billy.

He is a feral pop creature who was born Will Oldham in 1970. He's a dude who is equal parts man, myth and folk-beast. His ravaged voice will break your heart.

It is said you could spy him surmounting Glen Lyon in the eighties, this shadowy, bearded American, who holidayed near Ben Lawers as a teen and has since become one of our greatest songwriters. More recently, he was spotted in a Kanye West video (Can't Tell Me Nothing), and an R Kelly comic-opera (Trapped in the Closet). You might have heard Johnny Cash cover his wounded psalm, I See A Darkness.

And here he is now on the phone from Kentucky, dog barking in the background as we chat about why he cannot make a hip-hop record, and how a recent Nick Cave proposition blew his mind. The line connects us from Perthshire to Louisville, and demarcates two cardinal points on our protagonist's musical map. The latter is his native soil; the former inspired a love affair with Scots music, thanks to a bond he formed with a local teenager, Andy Shearer.

Oldham's debut release was the Ohio River Boat Song, a reworking of The Loch Tay Boat Song, which he recorded as Palace Brothers. Nineteen years later, his music and myth are still redolent of a land that intersects the Birks of Aberfeldy and Rob Roy's Leap. "It seems there are places where music resonates deeper and stronger than others," Oldham offers. "And some music can take us to those places. I put great stock in the things that keep bringing us back to certain people in our lives, or places in our lives, or to certain musics. And I have great faith in the understanding that there can be an underlying connection. Sometimes it becomes visible or apparent, but usually we just have to trust it."

For all of its earthly and folkloric resonance, Oldham's art also incorporates punk and pop. He has covered Bjork (I've Seen It All) and Mariah Carey (Can't Take That Away) and his fascination with urban superstars like Kanye West is well-documented. "My brain doesn't delineate between different musics" he explains. "Someone can devastate me with a beat, or devastate me with a melody. Often the greatest difference is in terms of production and arrangement."

So in theory it's just a lack of tools that's stopping him making a hip-hop record? "I can't perform hip-hop because I have no idea how to make a beat," he laughs. "It's just a question of equipment." (It's an attractive notion, incidentally, if his 2005 alliance with rap insurgent Sage Francis is anything to go on).

Oldham is also in thrall to vintage rock: he has said that he aimed to make his early albums in the spirit of the Rolling Stones' Let It Bleed. So does his enduring collaborative ethic derive from the folk tradition, or from a sense of rock communion? "I'm not really a rock 'n'roll party kind of person," reflects the some-time actor. "I think the idea is more related to folk – you know, that the more interconnected music is, the stronger it becomes."

Oldham's collective approach and penchant for a female vocal foil is vividly expressed though his folk-rock union with Trembling Bells. He first met the band's frontman, Alex Neilson, when they worked on Alasdair Roberts's No Earthly Man (2005), and they toured together with Harem Scarem. (Said Highland jaunt was organised by Oldham's childhood friend Shearer, who also programmes Perth's Southern Fried festival).

"We're in the midst of an intense collaboration," Oldham says of the Trembling Bells accord. "They've written a set of duets for [mediaeval/ acid-folk chanteuse] Lavinia Blackwall and myself." Their split seven-inch with the Incredible String Band's Mike Heron offered an enticing preview. "Oh yeah," he growls approvingly. "That's a cool record."

Let us dwell upon that growl awhile. It embodies Oldham's carnal stage character, and his uninhibited aesthetic. There has always been something of the randy, lupine straggler in Bonnie Prince Billy – from his untamed whiskers, through his Superwolf tryst with Matt Sweeney, to his excellent latest long-player, Wolfroy Goes to Town.

His lyrical idiom is typified by an orgy of zoomorphism, wry euphemism and bruised romance. Witness the languorous chamber-folk of Wolf Among Wolves ("Why can't I be loved for what I am / a wolf among wolves and not as a man?"), the beatific alt-rock of Beast for Thee ("At home on Wednesday morn / astride my horny horn"), or the tender expectancy of Strange Form of Life ("The softest lips ever, twenty-five years I've been waiting to kiss them / smiling and waiting, to bend down and kiss, twice, the softest lips").

Strange Form of Life, from his 2006 opus, The Letting Go, demonstrates Oldham's knack for crafting songs as beautiful as any you'll ever hear, and given that Wolfroy is his 21st long-player, there are many more. They stretch back to his hard-to-find Palace albums, which are being reissued in February.

"I'm putting the lyrics in this time," he states. "All lyrics get on to the internet now, and every song has five or six crucial typos, and then it's reprinted a thousand times. So I figured it'd be nice for them to say what I wanted."

Those lyric websites are notorious for corrupting a song's meaning just by misinterpreting a few letters. "Oh my God yeah," he nods. "My girlfriend had this huge thing, she was furious with me, because there was a lyric that was important to her in a song and it was printed online as something else. For all I know, it was done by someone in a Beijing basement who'd been tasked with filling all these lyrics and download sites." And they almost sabotaged your relationship by mishearing a lyric? "Exactly," he laughs.

Does Oldham think the meanings of his songs change when other people make them their own? What happened to I See A Darkness after Johnny Cash sang it? "Well, it's such a thrill to hear a song any time it's sung by someone else," he offers. "It's such a thrill to let go at that time – to get to be the audience – and I have to say, never more so than when Johnny Cash sang that song. I still have a hard time imagining that.

"Although, woah man, there was this thing over the summer," raves our agrarian mystic. "I think Nick Cave has written another movie, and they were proposing the idea of doing one of my songs for the soundtrack. It was [sublime duet] Lay and Love, and the people that they presented for it, in this kind of would-you-mind way, were [octogenarian bluegrass livewire] Ralph Stanley and Emmy Lou Harris!" He could not sound more animated.

"It ended up not happening but I don't even care – I was immediately able to imagine how it would sound, and that was so exciting. I mean I usually don't like to licence my songs to movies or anything, but I was just like – the idea of those two voices together, oh my God -"

He laughs and babbles incoherently.

He is human after all.

Bonnie Prince Billy plays the Old Fruitmarket, Glasgow on January 29, as part of Celtic Connections. Wolfroy Goes to Town is out now on Domino.