she got visibly confused and said, “Oh.”

Now I can't read body language through text but maybe she had an assumption, that got destroyed, therefore she looked confused? It doesn't mean that she didn't know the lyrics or the man. Also do you enjoy being needlessly cryptic.

I don’t know what to do with confused disengagement.

Engage by reassuring, or changing the topic? Cracking a joke? ("Also, I'm way too lazy to colour-match"). Whatever.