I'd heard rumors of this. This is from a recent interview w/OM engineer Mark Howard:
"So, on Oh Mercy, I’m not sure if he had an actual sound in his head to begin with. But he had actually recorded this whole record before it came to us. With Ron Wood. There’s a whole version of Oh Mercy that was recorded with Ron Wood already. But I think Dylan had maybe decided he didn’t like what had happened."
Another very interesting look into Bob's often eccentric working processes in the studio -- too long to post here but worth a read for Dylan fans -- look here:
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uncut.co.uk]